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Maruti: CMP: 12389: Sales LongTerm: 14%, Sales Q1_FY25: 10% | Q1FY25 RESULT UDPATE
Maruti Suzuki India Limited (formerly Maruti Udyog Limited) is the Indian subsidiary of Japanese automaker Suzuki Motor Corporation. As of April 2024, the company had a leading market share of 40 percent in the Indian passenger car market. The company is known for making highly reliable, low-maintenance cars for the Indian market. Maruti Udyog Limited was founded as a joint venture in 1981 by the Government of India with Suzuki Motor Corporation as a minor partner. In 2003, the Government of India sold most of its stake to Suzuki Motor Corporation and later, completely exited the company in 2007. At first, Maruti Suzuki was mainly an importer of cars. In India's closed market, Maruti received the right to import 2 fully built-up Suzuki in the first two years, with the early goal to use only 33% indigenous parts. This upset the local manufacturers considerably. There were some concerns that the Indian market was too small to absorb the comparatively large production planned by Maruti Suzuki, with the government even considering adjusting the petrol tax and lowering the excise duty in order to boost sales. Local production commenced in December 1983 with the introduction of the SS30/SS40 Suzuki Fronte/Alto-based Maruti 800. In 1984, the Maruti Van with the same three-cylinder engine as the 800 was released and the installed capacity of the plant in Gurgaon reached 40,000 units. In 1985, the Suzuki SJ410-based Gypsy a 970 cc 4WD off-road vehicle, was launched. In 1986, the original 800 was replaced by an all-new model of the 796 cc hatchback Suzuki Alto (SS80), and the 100,000th vehicle was produced by the company. In 1987, the company started exporting to western markets, when a lot of 500 cars were sent to Hungary. By 1988, the capacity of the Gurgaon plant was increased to 100,000 units per annum. In 1989, the Maruti 1000 was introduced and the 970 cc. By 1991, 65 percent of the components, for all vehicles produced, were indigenized. After the liberalisation of the Indian economy in 1991, Suzuki increased its stake in Maruti to 50 percent, making the company a 50-50 joint venture with the government of India as the other stakeholder. Relations between the Government of India, under the United Front (India) coalition and Suzuki Motor Corporation over the joint venture was a point of heated debate in the Indian media until Suzuki Motor Corporation gained the controlling stake. This highly profitable joint venture that had a near monopolistic trade in the Indian automobile market and the nature of the partnership built up till then was the underlying reason for most issues. This led other even local Indian car manufacturers to back stance. The success of the joint venture led Suzuki to increase its equity from 26% to 40% in 1987, and to 50% in 1992, and further to 56.21% as of 2013. Maruti Suzuki has two manufacturing facilities in Haryana (Gurugram and Manesar), and one manufacturing complex in Gujarat wholly owned by parent company Suzuki which supplies its entire production to Maruti Suzuki. All manufacturing facilities have a combined production capacity of 2,250,000 vehicles annually (1.5 million from Maruti Suzuki's two plants and 750,000 from Suzuki Motor Gujarat). The central government privatised Maruti in 2002 and Suzuki became the majority owner of Maruti Udyog Limited. Last year we saw Maruti producing 20 Lakh Units which is the big landmark for the Indian Market.
Consistent Results were seen with Revenue growth of around 14% For the last 16 years pre-covid. Hence, if bought during IPO at 2003 worth 1 Lakh today valuation could be 75X + High and consistent dividend earnings. A debt-free company with a history of consistent profit-making.
FY 2004: Sales: 10000 Cr | Profits: 500 Cr
FY 2010: Volume: 10.2 lakh | Sales: 30000 Cr | Profits: 2500 Cr
Strong growth was seen till the year 2019 in volumes and hence in sales and Profits.
FY 2019: Volume: 18.6 lakh | Sales: 88000 Cr | Profits: 7600 Cr
During Covid volumes were highly affected, which affected their sales and hence profits.
FY 2022: Volume: 16.5 lakh | Sales: 88k Cr | Profits: 3766 Cr
This shows the muted volume growth post the year 2019 & hence Maruti was in correction mode.
Till Fy_2023 we have not seen the majority of the Auto companies able to sell volumes which were more than fy_2019 except Tractors. Passenger Car Industry sales have been in decline mode since 2018. Hence we saw Maruti in the correction post covid and still it is in the correction mode. Similar to the PV industry the Lifetime High units for even Maruti were in 2019 near to 19 Lakh which were crossed last year again after the long 3 years of decline. Last to last year again was the year with lifetime high volumes, sales and Profits. Auto sales worldwide have been affected for the last few years. Except EV which is the new techno change majority of the automakers were in degrowth world wide. Fy_23 was the 1st year after a long muted phase in Auto where in Passenger Cars were again able to cross previous lifetime high volumes of fy_19. Fy_23 again we saw the upsurge in PV industry with 39 Lakh units & hence Maruti with 19.7 Lakh units which were lifetime high, Hence we saw the lifetime high sales 1st time crossing 1 lakh Cr benchmark reaching 1.2 Lakh Cr and Profits also were lifetime high at 8211 Cr. Yes, Auto segment and Passenger car again was in good growth and we have recommended to increase the stake.
Q1_Fy_2025 Result:
Volume Growth (Q1 FY25 vs. Q1 FY24)
Sales Volume:
Q1 FY25: 521,868 units
Q1 FY24: 498,030 units
Growth: 4.8% YoY (Volume Growth has been muted this quarter due to elections)
Segment Growth:
Domestic sales saw a 3.8% growth, led by Utility Vehicles (UVs) with a 29.1% increase, while Compact and Mini segments declined by 12.4%.
Export sales increased by 11.6%, a key driver of volume growth(INVESTOR_PRES_MARUTI)(MARUTI_Q1).
Sales and Profit Growth (Q1 FY25 vs. Q1 FY24)
Net Sales:
Q1 FY25: ₹338,753 million
Q1 FY24: ₹308,452 million
Growth: 9.8% YoY. (Sales Growth has been muted this quarter due to Low volumes)
Profit After Tax (PAT):
Q1 FY25: ₹36,499 million
Q1 FY24: ₹24,851 million
Growth: 46.9% YoY (Strong profitability due to improved margins)
Profit Margins (Q1 FY25 vs. Q4 FY24 & Q1 FY24)
Q1 FY25 vs. Q1 FY24:
Operating EBIT margin: 11.1% (up by 390 bps from 7.2% in Q1 FY24)
PAT margin: 10.8% (up by 270 bps from 8.1%)
Improvement driven by cost reductions, softening commodity prices, and favorable exchange rates
All those holding since long or added during the past fall near 5000 should still add near the upgraded buying level during any fall near 10650. We can have targets of 16627 this Year itself. During the long history of Maruti when growth was high we generally did not see Maruti at fair valuations. Still Maruti despite a strong rally is trading near to fair valuations.
We may see strong 12% to 15% growth this decade and even later years due to their Focus on all technologies. Their Focus is on Battery Electric Vehicle (BEV), Hybrid Electric Vehicle (HEV), E20 & Flex (E85) Vehicles, Bio-CNG (CBG) & CNG. Maruti is already Setting up EV Ecosystem in India. Suzuki has set up India’s first Li-ion cell and battery manufacturing plant in a JV with Toshiba and Denso (TDSG). TDSG started production in 2021. Strong EV Line up for Future. Passenger Cars which may cross 40 Lakh units this year could be seen around 60 Lakh till the year 2030 and 30% could be Battery Electric Vehicles till that time. Current EV penetration is 2.5% where Tata Motors is the leader with 73% market share in India. Cumulative total Passenger Vehicle sales from FY’2022 to FY’2030 = 4.3 Cr while Cumulative BEV sales from FY’2022 to FY’2030 = 60 lakh where TataMotors is leader. Cumulative non-BEV sales from FY’2022 to FY’2030 = 3.7 Cr (86%) where Maruti is Leader. There is still a Non-BEV sales of 86% that needs to be addressed. IF EV has reached 7773 Public Charging Infrastructure from mere 450 in fy_21 then even CNG is a Big opportunity for decarbonization. CNG Stations in India which were near to 1000 in 2015 today are near to 5000+ and are estimated to reach 17700 till 2030. Currently Gujarat alone leads with around 20% of total CNG stations of India. Market is looking 50% of the Indian market which is 30 lakh units out of 60 lakh of industry units. With the growth of the Indian car market and export potential, Maruti Suzuki India Ltd (MSIL) would need to increase its production capacity to about 4 million cars per annum by 2030-31, almost double from current levels. This would happen over several locations, some of which are known and some being studied. On the other hand, given the carbon neutrality requirements, several powertrain technologies like EVs, Hybrids, CNG, Ethanol etc. will co-exist for a reasonably long period of time. Managing this scale and complexity of production with multiple powertrains, under different managements, would pose several challenges.
As an investor our focus should be on these 4.3 Cr vehicles to be sold this 8 years Maruti should be definitely the Bright spot due to Debt Free status and Highest Market share of around 41%. If you take even 35% MarketShare for this decade then out of 4.3 Cr vehicles to be sold 1.5 Cr vehicles alone come to Maruti. Long term wealth creator with consistent dividends.
Suzuki Motor is a promoter with a 58.19% stake now. While MF holds around 5.64% & Fii holds around 23.16% while retail investors just 4%.
DISCLOSURE: FOR EDUCATION PURPOSES, DO NOT TREAT AS A RECOMMENDATION
