Not quite the time to get one

The country’s largest passenger car maker has taken a knock over yen worries, but its stock is still not a screaming 'buy' 

When an auto major has an advertising and marketing budget of Rs.800 crore, the biggest in the industry, creating a buzz around its vehicles is a given. That’s what the country’s largest passenger car maker Maruti Suzuki has often done by spending the maximum on TV commercials and shows at over Rs.450 crore. Just last November it became the first company in India to produce an entire TV serial, Chalti ka Naam Gaadi, scripted around its flagship model, the Alto 800. Three years ago it had produced a Hindi film titled Mere Dad ki Maruti. The Japanese car maker has pushed the envelope not just with advertising, but more so within its bouquet of offerings.

Ambrish Mishra, Director, institutional research, JM Financial Today, with close to 16 models across seven different categories, Maruti reigns supreme with a market share of 47%. It has plans to launch 15 new models by 2020 and double its sales network to 4,000 over the same period. In fact, its performance, too, has matched its ad blitzkrieg, with sales and PAT growing at CAGR of 10% and 15% over the past five years.

In fact, in FY16, while its peers struggled, Maruti’s sales grew 16% to over Rs.56,000 crore, profit jumped 23% to over Rs.4,500 crore, led by benign input prices and robust volume growth. Not surprising that when the FY16 results were announced three months back, chairman RC Bhargava mentioned: “In most ways, this year’s result is the best we have ever had. We are setting a challenge of repeating a double-digit growth in FY17, in spite of all difficulties. It is not going to be an easy year.”

Prophetic words indeed, for things did turn nasty. The volatility in the yen following the UK’s exit from the Eurozone and the company’s first double-digit decline in monthly sales in June, following a fire outbreak at one of its supplier’s plant and a maintenance shutdown, are a case in point. Domestic sales slipped 10% in June, while exports took the brunt, plummeting 45%. Since the year began, the stock has come off its high of over Rs.4,600. It plunged to Rs.4,084 on Jun


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