Maruti Suzuki India limited one of the leading automobile manufacturers in India was established during 1980s and Suzuki partnership was started in Feb 1981. The Government of India sold its major stake, periodically in the past 10 years, to the technical collaborator and presently the majority stake of the company is held by Japan’s Suzuki motor company. In September 2007 the company’s name Maruti Udyog was changed as Maruti Suzuki. Indian Government recently sold its 18.2% stake in the company to Indian financial Institutions, and 54.2% is owned by Suzuki of Japan.

The Company’s car stable has 11 brands including Maruti 800 Duo, DZire, Omni, Zen, Alto, WagonR, Gypsy, Sumo, Esteem, Baleno, Swift, the MPV and Spots vehicle Grand Vitara. The company’s manufacturing plant is located in Gurgaon, which is capable of manufacturing 3, 50,000 units per annum. More than half the numbers of cars sold in India are made by Maruti. The company has 562 outlets spread over 372 towns and provides maintenance support to customers at 2538 workshops in over 1200 towns. Since inception it has sold over 6.75 million vehicles including almost 500, 000 vehicles exported to Europe and other places.Suzuki and Maruti have plans to invest Rs. 90 Billion till 2010 to increase capacities and introduce new models. Maruti had three distinct phases so far in its growth in India.

When it was born it had an unassailable dominance in the car market with over 80% share. Then market was flooded with other car makers in mid 90s and its market share fell to 50%. Maruti effectively sliced the market and in each of the niches it created, Maruti went onto reaffirm its top position by becoming trusted brand and its dominance continues, especially in the sub compact models. This is the third phase in Maruti’s existence. It has capitalized on its export markets to expand presence targeting specific markets. Maruti is rolling out more models; expanding sales overseas through appropriately designed vehicles and dominating local market with complete control over certain market niches. Maruti has carefully chosen to maintain a marked thrust to exports while continuing to maintain its grip in domestic where volumes have a bearing on the prices at which one can sell.

FINANCIALS

The company recently announced its Q1 FY09 results. This quarterly result is compared with its earlier quarterly results and are tabulated below 

 Net profit of the company for the quarter ended by June 30 2008 stood at Rs.4,658 Million an increase of 51% against the last quarter ended March 31 2008, even as compared to the corresponding quarter last year the profit it posted a decline by 6.7%. Revenues increased by 2.9% to Rs.475.3 Billion from Rs. 461.9 Billion reported in the same period last fiscal. As the prices of inputs like steel, aluminum, rubber, and power are increasing the operating profit of the company declined by 19%.

Last quarter the company rolled out second edition of Maruthi 800, “Maruti 800 Duo” (LPG variant). The company registered total sales of 192, 584 units for the quarter ended June 30 2008 an increase 13.5% as against 169, 669 units sold out in the same period a year ago. Domestic sales and Exports accounted for 93.51% and 6.49% of the total sales respectively. Exports for this quarter grew by 13.5% as against the corresponding quarter last year. Increase in the sales of Swift, DZire, and Alto boosted the domestic sales of the company to grow by 12.1% against the corresponding quarter previous year. Depreciation of rupee value against Dollar by 5% resulted in higher exports realization. Yen appreciation against rupee by 14% increased the import bill. In the month of July total sales grew by 1.1%. Domestic sales moved up by 0.1% and exports grew by 11.1% when compared to sales in the month of July 2007.

COMPANY OUTLOOK

Increase in the prices of steel and other raw materials, rise in the interest rates for Auto loans will remain major factors for the automotive companies in the forth coming quarters. The company is focusing on increasing the production of Swift and DZire. The company recently revised the prices of its cars by Rs. 1000-18000. The highest increase is on Swift and DZire. The company’s new launch Maruti 800 Duo is having a moderate demand in the market. The company has to face a lot of challenges in the upcoming quarters. It is expected that the company will do well in view of its diverse product portfolio having strong demand in the market, overcoming barriers and delivering positive results.

STOCK OUTLOOK

The stock is now trading in the region of Rs.570-620. Price hovering below the exponential moving averages suggest continued decline. The stock has also breach the decline that started in Jan 08. Even a cursory look at the stock price lines and the economy as whole troubled by high interest rates, increasing crude oil and raw material prices will reconfirm the bearish look on the stock.

The stock lost nearly 18% in the last one month. Since November 2007, the stock is sloping downwards breaching all its support levels. Long term investors need to wait for the reversal tight money policies that are being imposed by RBI and or the decline in crude prices before considering investing in this stock. Both short term and medium investors may accumulate the stock after the price gets stabilized at the level of Rs.600 which is good support level for this stock.