BUSINESS VALUATION

CIA – III (B)

Topic

EQUITY VALUATION REPORT ON MARUTI SUZUKI Ltd

By

ADITYA KUMAR GAURAV- 2327006

ANUSHREE PANDEY – 2327012
SAHIL KUMAR -2327050

Submitted to
PROF. Sowjanya GK

MBA PROGRAMME
SCHOOL OF BUSINESS AND MANAGEMENT
CHRIST (DEEMED TO BE UNIVERSITY)
BANGALORE

August 2024
 MARUTI SUZUKI Ltd.
CMP Target Potential Market Cap Recommendation Sector
(INR Mn)
INR 12,865 INR Upside 40,35,373 BUY Automobile
14,975 16.4%

MARKET DATA
ABOUT
Shares O/S(Mn) 314
Maruti Suzuki (MSIL) is the market leader in Mkt Cap (INR Mn) 40,35,373
the domestic passenger vehicle (PV) space 52 Wk. H/L (INR) 12,928/ 8,377
with market share pegged at 43.4% with Volume Avg (3m K) 553
popular models being Alto, WagonR, Swift, Face Value (INR) 5
Brezza, Baleno, Ertiga, etc, among others. Bloomberg Code MSIL: IN

• Market leader in each sub-segment - cars SHARE PRICE PERFORMANCE

(63.6%), UV (19.5%), vans (95.7%)
• Strong b/s; ₹ 42,000 crore cash and
investment on books as of FY22
BUY OUTLOOK
Maruti Suzuki India Ltd. (MSIL) is currently
recommended as a "Buy" with a target price of
INR 14,975, reflecting a potential upside of
16.4% from the current market price of INR
12,865. The strong recommendation is based on
multiple growth levers such as robust sales
volumes in domestic and export markets, an
increasing share of Utility Vehicles (UVs), and SHARE HOLDING PATTERN
strategic focus on alternative fuel vehicles like CNG
and hybrids. Additionally, the company's
anticipated entry into the electric vehicle (EV)
market in FY25 is expected to further bolster its
growth trajectory.
COMPANY OVERVIEW
Maruti Suzuki India Ltd., a leading automobile
manufacturer, dominates the passenger vehicle
(PV) market in India. The company has a strong
portfolio that includes compact cars, utility vehicles, and vans. It is also
expanding its focus on alternative fuel types and EVs to meet changing consumer
preferences and regulatory demands. MSIL’s strategic emphasis on exports and
a diverse product mix has enabled it to maintain a leading position in the
competitive automotive market.

HIGHLIGHTS OF COMPANY
Sales Performance: In Q4FY24, MSIL's sales volumes
exceeded expectations, driven by strong domestic and
export market performance. Maruti Suzuki India
Limited (MSIL) reported a 6.0% increase in sales
volumes for Q4 FY24, surpassing our estimates. This
growth was driven by stronger-than-expected sales in
both domestic and export markets.
The share of Utility Vehicles (UVs) in MSIL's domestic
passenger vehicle (PV) sales remained robust in Q4
FY24, accounting for 37.9% of domestic PV volumes.
This trend is expected to continue into FY25,
supported by the rising demand in the UV segment
and MSIL's strong product lineup.
MSIL has also achieved market leadership in the SUV
segment in FY24, thanks to the positive reception of
its brands—Grand Vitara, Brezza, Jimny, and Fronx.
Product Mix: The share of Utility Vehicles in MSIL’s
domestic PV sales was 37.9% in Q4FY24, and this is
expected to increase due to high demand for SUVs.
Export Growth: MSIL's export volumes grew by 9.2%
YoY in FY24, reaching 283,067 units, despite
challenging global market conditions. The company
aims to export over 300,000 units in FY25E and
800,000 units by 2030E.
Focus on Alternative Fuels: Rising demand for CNG
and hybrid powertrains is anticipated, given the slow
adoption of EVs due to infrastructure limitations.
Entry-Level Segment: While the entry-level segment has seen a decline, it
remains a significant volume contributor, and a revival is expected from FY26E
as inflation cools.

INDUSTRY ANALYSIS
Automobile Industry
The Indian automobile industry is one of the
largest in the world, with an estimated value
of USD 100 billion in 2023. The industry is
projected to grow at a Compound Annual
Growth Rate (CAGR) of 8.1% during the
forecast period (2023-2028).
Growth Stage
The Indian automobile market stood at USD 75
billion in 2020 and is expected to reach USD
125 billion by 2025, registering a CAGR of 10%.
The demand for passenger vehicles is
anticipated to grow by 9.5% per annum by
2025, driven by factors such as rising income
levels, increased urbanization, and favourable
government policies. The automobile industry
is expected to contribute significantly to India's
GDP, with projections suggesting it could reach
USD 150 billion by 2030.

Competitive Analysis
• Maruti Suzuki India Ltd, a subsidiary of
Suzuki Motor Corporation, has been a
dominant player in the Indian passenger
car market for decades.
• Its strong brand recognition, extensive
dealership network, and efficient
manufacturing facilities have contributed
to its market leadership.
Key Competitors
Maruti Suzuki primarily competes with other major automobile manufacturers
in India, including:
• Hyundai Motor India: Known for its stylish designs and advanced features,
Hyundai has been gaining market share rapidly.
• Tata Motors: A diversified automotive company, Tata Motors has made
significant strides in the passenger car segment with models like the Nexon
and Altroz.
• Mahindra & Mahindra: Primarily known for its SUVs and commercial
vehicles, Mahindra has been expanding its presence in the passenger car
market.
• Toyota Kirloskar Motors: A joint venture between Toyota Motor
Corporation and Kirloskar Group, Toyota offers premium vehicles and enjoys
a loyal customer base.
BUSINESS ENVIROMENT FACTORS
PESTEL Analysis of Maruti Suzuki India Ltd.
1. Political Factors expected to grow, benefiting
Maruti Suzuki.
• Government Policies: The Indian
government has been promoting • Inflation and Interest Rates:
the adoption of electric vehicles Fluctuating inflation rates and
(EVs) through various incentives, interest rates impact the cost of
which aligns with Maruti Suzuki's financing for both consumers and
plans to introduce EVs by FY25. the company. Maruti Suzuki's
Policies supporting Make in India ability to offer competitive
initiatives and favourable export financing options and manage
regulations also provide Maruti input costs is critical in
Suzuki with opportunities to maintaining affordability and
expand its manufacturing and market share.
export capabilities.
3. Social Factors
• Regulatory Environment: Stringent
• Changing Consumer Preferences:
emission norms, such as Bharat
There is a growing preference for
Stage VI (BS-VI) standards, have
utility vehicles (SUVs) and
pushed Maruti Suzuki to innovate
environmentally friendly options
and adapt its vehicle lineup.
like CNG and hybrid vehicles
Compliance with these regulations
among Indian consumers. Maruti
is crucial for maintaining market
Suzuki’s focus on expanding its
leadership, particularly in the face
SUV lineup and alternative fuel
of increasing environmental
vehicles positions it well to meet
concerns.
these changing demands.
2. Economic Factors
• Urbanization: Rapid urbanization
• Economic Growth: India's economic in India is leading to increased
growth, projected at around 6-7% demand for compact and fuel-
annually, supports increased efficient vehicles. Maruti Suzuki,
consumer spending on with its strong portfolio in these
automobiles. As income levels rise, segments, is well-placed to
particularly in urban areas, demand capitalize on this trend.
for passenger vehicles is
4. Technological Factors • Resource Management: Efficient
management of resources,
• Innovation in Powertrains:
including water and energy, is a
Maruti Suzuki is investing in the
development of electric vehicles • priority for Maruti Suzuki. The
and hybrid technology to stay company has implemented
competitive in a market several initiatives to conserve
increasingly driven by resources and reduce waste in its
sustainability and efficiency. The manufacturing processes.
launch of its first EV in FY25 is a
6. Legal Factors
significant step towards future-
proofing its product lineup. • Regulatory Compliance: Compliance
with various national and
• Automation and Digitalization:
international regulations, such as
The company is also embracing
safety standards and emissions
automation in its manufacturing
norms, is crucial for Maruti Suzuki.
processes and digitalization in its
The company’s proactive approach to
sales and service operations.
adhering to these regulations helps it
These technological
avoid legal challenges and maintain
advancements are aimed at
its market reputation.
improving efficiency, reducing
costs, and enhancing the • Intellectual Property Rights
customer experience. (IPR): Protecting its innovations
and technologies through robust
5. Environmental Factors
intellectual property rights is vital
• Sustainability Initiatives: As for Maruti Suzuki to maintain its
environmental concerns grow, competitive edge, especially in
Maruti Suzuki is focusing on the face of increasing global
reducing its carbon footprint competition.
through the production of CNG,
hybrid, and electric vehicles. The
company’s efforts to improve fuel
efficiency and reduce emissions
are in line with global
sustainability trends.
Economic Analysis
• Rising Raw Material Prices: The optimizing its supply chain and
automobile industry has been inventory management.
significantly impacted by rising
• Geopolitical Tensions: Geopolitical
raw material prices, including
tensions, such as those related to
steel, aluminium, and other
trade wars and conflicts like the war
essential components. These cost
in Ukraine, have further strained
increases have put pressure on
the global supply of critical
Maruti Suzuki’s margins, as the
materials and components. This has
company seeks to balance
led to increased input costs and
production costs with
uncertainty in global trade, which
competitive pricing in a price-
affects Maruti Suzuki’s export
sensitive market.
strategies and overall cost
• Inflation: Inflation remains a structure.
challenge for Maruti Suzuki, as it
• Government Regulations: Stringent
affects both the cost of
government regulations, particularly
production and consumer
around emissions and safety
purchasing power. Higher
standards, have increased
inflation rates have led to
compliance costs for Maruti Suzuki.
increased vehicle prices, which
While these regulations are
can dampen demand, particularly
necessary for environmental and
in the entry-level segments
consumer protection, they require
where price sensitivity is higher.
significant investment in research
• Supply Chain Disruptions: The and development to ensure that
global supply chain has faced vehicles meet these evolving
disruptions due to the COVID-19 standards. Additionally, incentives
pandemic, semiconductor for electric vehicles (EVs) provided by
shortages, and logistical the government present both an
challenges. These issues have opportunity and a challenge as
caused delays in vehicle Maruti Suzuki adapts its product
production and delivery, lineup.
impacting Maruti Suzuki's ability
to meet market demand
efficiently. The company has had
to navigate these challenges by
ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG)

Maruti Suzuki's ESG Focus

Maruti Suzuki, India's largest passenger car manufacturer, has been making
significant strides in its Environmental, Social, and Governance (ESG) practices.

The company's commitment to sustainability is evident in its various initiatives

across these three pillars.
Environmental Highlights

• Reduction of CO2 Emissions: Maruti Suzuki has consistently worked to

reduce the carbon footprint of its vehicles and operations. It has achieved a
significant reduction in CO2 emissions through advancements in technology,
improved fuel efficiency, and the introduction of CNG and electric vehicles.

• Renewable Energy Adoption: The company has been actively promoting the
use of renewable energy sources, such as solar and wind power, at its
manufacturing facilities.

• Sustainable Manufacturing: Maruti Suzuki has implemented various

sustainable practices in its manufacturing processes, including waste
reduction, water conservation, and energy efficiency measures.

Social Highlights

• Community Development: The company has been involved in various

community development initiatives, focusing on education, healthcare, and
infrastructure development.

• Employee Welfare: Maruti Suzuki prioritizes the well-being of its

employees, offering comprehensive healthcare benefits, training programs,
and employee assistance programs.
 • Supplier Development: The company has implemented programs to
promote sustainable and ethical practices among its suppliers.

Governance Highlights

• Corporate Governance: Maruti Suzuki adheres to strong corporate

governance principles and practices, ensuring transparency, accountability,
and ethical conduct.

• Risk Management: The company has robust risk management systems in

place to identify and mitigate potential risks.

• Diversity and Inclusion: Maruti Suzuki promotes diversity and inclusion

within its workforce, fostering a positive and inclusive work environment.
Recent ESG Highlights

• Partnership for Biogas Production:

Maruti Suzuki has partnered with
National Dairy Development Board
(NDDB) and Banas Dairy to set up
biogas production plants in India,
contributing to renewable energy
generation and reducing carbon
emissions.

• Electric Vehicle Initiatives: The

company has been investing in
electric vehicle technology and
infrastructure, aligning with the
global trend towards sustainable
transportation.

• Supplier Sustainability Assessment:

Maruti Suzuki has implemented a
supplier sustainability assessment
process to evaluate its suppliers'
performance on environmental, social,
and governance criteria.

• Circular Economy Initiatives: The

company has been exploring
opportunities to adopt circular economy
principles, such as recycling and reuse of
materials.

• CO2 Emission: Suzuki has set a new target

for the reduction of CO2 emissions, which
are considered a factor in climate change,
by 30% of the global average CO2 emissions from new vehicles (compared to
FY2010 results) for automobile products under the Suzuki Environmental Plan
2025
Key financial highlights
VALUATION AND RISKS

Maruti Suzuki India Ltd. (MSIL) is per share (EPS) estimates for FY24E,
expected to experience robust volume FY25E, and FY26E have been revised
growth in FY25, driven by a strong upwards by 3.2%, 1.6%, and 4.6%,
order book, low inventory levels, and respectively. The EBITDA margin
continued high demand for SUVs. The estimates have also been adjusted
company’s focus on exports and upwards to reflect stronger margins
diversification into multiple expected from Q4FY24E onwards.
powertrains, including CNG, hybrids,
and flex-fuels, supports the MSIL is trading at a P/E multiple of
sustainability of its topline growth. 29.6x for FY24E, decreasing to 24.2x by
Additionally, a gradual recovery in the FY26E. Applying a P/E multiple of 28.2x
entry-level car segment is anticipated to the FY26E EPS of INR 531 results in a
as inflation moderates and buyer revised target price of INR 14,975 per
affordability improves by FY26, where share, implying a 16.4% upside from
MSIL holds a leadership position. the current market price (CMP).
Consequently, the “BUY” rating on
Operating margins are expected to Maruti Suzuki India Ltd. shares is
remain steady over the next two years, maintained.
balancing better realization, cost
reductions, and favourable foreign
exchange impacts against new capacity
expansions and the entry-level
segment's revival. MSIL's entry into the
electric vehicle (EV) market in CY24
with a premium offering is a key event
to watch.

Given the higher-than-expected

volumes in Q4FY24, continued export
growth, and the anticipated revival in
entry-level car sales, MSIL's earnings
DCF VALUATION

The Discounted Cash Flow (DCF) valuation of Maruti Suzuki India Ltd (MARUTI.NS)
is 8,151.04 INR. With the latest stock price at 12,243 INR, the upside of Maruti
Suzuki India Ltd based on DCF is -33.4%.

MSIL’s 1QFY25 results were healthy as it reported ~17%/~11.6% Adj.PAT beat to our/street
estimates led by healthy operating performance. Better than expected EBITDA at Rs45b (Est
Rs38.3b) was led by; 1) ~60bp reversal of one-off in RM reported in 4QFY24, 2) RM and forex
benefit offset by increased discounts, 3) favourable operating income and other operating cost
benefit of ~70bp/ ~30bp. However, this was offset by ~80bp negative operating leverage and
~30bp impact due to increased A&P spends. Despite ~10.6% QoQ volume decline,
EBITDA/vehicle came in highest at ~Rs86.3k/unit (+44% YoY/ +7.5% QoQ), is considered healthy.
Going ahead, increase in share of CNG, peak average discounts, stable RM and favourable mix
are the positive margins triggers which is expected to playout as volumes are likely to be muted
led by industry growth dynamics. MSIL would likely outperform the industry led by strong CNG
portfolio with ~33% contribution vs 27% in 4QFY24.
SUMMARY OF ANALYST RECOMMENDATIO