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Maruti Suzuki crosses Rs2 trillion in market cap

LiveMint logoLiveMint 02-05-2017 Ravindra N. Sonavane

Mumbai: Maruti Suzuki India Ltd on Tuesday crossed Rs2 trillion market capitalization to become the first Indian auto company to achieve this milestone.

At 9.20am, shares of Maruti Suzuki were trading at a record high of Rs6,674 on the BSE, up 2.3% from previous close, while India’s benchmark Sensex index rose 0.34% to 30,021.49 points. So far this year, Maruti has gained 23%.

Earlier, 19 Indian companies crossed this milestone, including Reliance Industries Ltd (RIL), Tata Consultancy Services Ltd (TCS), HDFC Bank Ltd, ITC Ltd, Housing Development Corp. Ltd, State Bank of India, Oil & Natural Gas Corp. Ltd, Infosys Ltd, Indian Oil Corp. Ltd, Hindustan Unilever Ltd, Coal India Ltd, ICICI Bank Ltd, Sun Pharmaceutical Industries Ltd, Bharti Airtel Ltd, NTPC Ltd, Wipro Ltd, NMDC Ltd, DLF Ltd and MMTC Ltd. However, the value for the latter 10 firms has since fallen below the Rs2 trillion mark due to correction in stock prices.

Currently, RIL is India’s most valued company with a market cap of Rs4.54 trillion, followed by TCS and HDFC Bank with market caps of Rs4.53 trillion and Rs3.97 trillion, respectively.

Maruti is the 12th largest auto company in the world, in terms of market capitalization. Its market cap is around 44% higher than that of its parent—Japan’s Suzuki Motor Corp.

On Monday, the company reported 23.4% increase in its domestic sales in April to 144,492 units from a year ago. The performance was led by robust growth across all segments. Sales of entry-level cars rose 21.9%, compact cars 39.1%, and mid-size and utility vehicles 23.2% and 28.6%, respectively, over the same month a year ago. It’s compact car models, including the Swift Dzire and Dzire Tour, accounted for sales of 63,854 units, up from 45,700 units last year.

On 27 April, the company reported strong 16% growth in its March quarter on the back of higher sales from its Baleno and Vitara Brezza models. Its market share inched up to 47.9% from 47.4% a year ago despite demonetisation.

Post earnings, most foreign brokerages have maintained a “buy” rating on the stock and increased the target price. CLSA increased its target price to Rs7,600 a share, Macquarie Research maintained its “outperform” rating and increased its target price to Rs6,850, Deutsche Bank has maintained its “buy” rating and raised its target price to Rs7,000, Nomura Research kept its buy rating and hiked its target price by 17.5% to Rs7,412 a share, while UBS Securities has a “buy” rating with a target price of Rs7,300.

“We remain positive on Maruti, as we expect strong volume growth in FY18-19 driven by implementation of the 7th Pay Commission and a strong model cycle. We expect valuation multiples to remain at the present level, as Maruti has demonstrated its ability to keep up with the premiumization of car demand and has increased its market share in higher-priced segments,” said UBS.

The company recommended a final dividend of Rs75 per share for 2016-17, more than double the Rs35 per share paid in the previous year and it also modified its dividend policy to the range of 18-40% compared to the earlier 18-30%.

“The company to continue to outperform industry, helped by its outstanding order book and strong model launch pipeline. Despite the margin miss, we believe it would be able to maintain margin at around 15%, driven by lower discounts as share of new models increases,” said IIFL Institutional Equities, in a report to its investors.

Of the 23 brokerages covering the stock, eight have a “buy” rating on Maruti, 13 have a “hold” rating, while two have a “sell” rating, shows Bloomberg data.

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