Maruti Suzuki shows stellar performance on bourses, achieves unique distinction

Maruti Suzuki due to its stellar performance on bourses during the recent years has achieved a feat no others Indian company with a foreign parent has ever done. Maruti Suzuki, already India’s No. 1 automaker has outgrown the Suzuki Motor in market value. Based on Tuesday’s closing stock price of Rs. 4, 158.80 on the Bombay Stock Exchange. The market capitalisation for the stock stood at $ 19.73 billion (Rs. 1.26 lakh crore). The Japanese parent Suzuki is valued at $ 19 billion. Recently Maruti also ousted Tata Motors as India’s most valued company.

Maruti Suzuki’s stellar financial performance and rosy outlook in the sluggish automobile market has driven Maruti’s stock rally. Maruti Suzuki delivered 65 percent (Approx) returns over a 1 year period. The stock is trading at a PE of 33 multiple.Over a 3 year period the stock generated 53 percent and over a 5 year period the annualised returns has been 24.96 percent. 

On the other hand, Suzuki had a bumpy ride in recent years with sales weakening in all major markets except Asia. The Indian unit has been the brightest spot for the Japanese company. Indian unit has been Suzuki’s biggest money-spinner, accounting for a quarter of revenue and a chunk of profit.

Barring Maruti , no other constituent of the CNX MNC has a market cap close to that of the parent. CNX MNC is an index that captures the stock performance of top MNC subsidiaries. The market value of Hindustan Uniliver is 22 percent of its Anglo Dutch parent Uniliver, while that of Castrol India is just 3 percent of British Petroleum. Historically Suzuki also had an upperhand. Due to the stellar performance of the Indian Unit the gap narrowed and eventually Maruti Suzuki took over the parent company in terms of market capitalisation.

Maruti Suzuki’s earnings per share is expected to more than double over a 3 year period to Rs. 278 per share from current earnings per share of Rs. 126 , according to estimates compiled by Bloomberg.

Suzuki;s earnings performance has been weighed by its weak performance in Japan and markets outside Asia. It reported a 4 percent decline in operating profit for the fourth quarter of fiscal 2015 and its outlook for a 6 percent increase in the operating profits estimate for fiscal 2016 was below consensus estimate.

The widening divergence between the performance at Suzuki and Maruti is leading global fund managers to pick the Indian company as a preferred play to participate in the Asian passenger car market rather than the parent.