Despite this, the stock of Maruti Suzuki India, the country’s largest PV maker, trades at 29 times one-year forward earnings. That’s 66 per cent higher than its 10-year average valuation on hopes of volume recovery.
A lot, however, depends upon whether its dealers would prefer to refill their inventories following upbeat sales during the latest festive season and to what extent.
In addition, the company faces stiff competition in the SUV segment at a time when it has vacated the diesel segment amid regulatory changes. These factors may make volume improvement an uphill task.
The slowdown and liquidity problem faced by dealers has led to a reduction in inventory across most carmakers and focus on retail sales as opposed to wholesale volumes (vehicles despatched to dealers).
This is evident from the divergence in the retail and wholesale sale volumes. For instance, in October, retail sales rose by11 per cent, according to data provided by the Federation of Auto Dealers Associations, while wholesale data released by the Society of Indian Automobile Manufacturers (SIAM) showed a measly growth of 0.3 per cent.
The carmakers made concerted efforts to reduce inventory to 25-30 days in October from 50-60 days a few months ago to ease the burden on dealers. Wholesale volume growth will largely depend on whether the companies refill dealer inventories to levels existing before the slowdown. This is also dependent on whether the dealers would risk piling up inventories at a time when demand continues to remain weak.
Maruti Suzuki’s volume fell 24 per cent in the first half of the current fiscal. It is expected to fall 15-17 per cent for the full FY20, the worst decline in over five years.
Maruti Suzuki has launched its eight petrol models ahead of new emission norms effective from April 2020. However, the company will not be manufacturing diesel vehicles in the medium term as it is evaluating cost competitiveness of diesel cars under BS-VI.
Kia Motors has launched its sports utility vehicles (SUVs) Seltos in both petrol and diesel variants. Even as the fate of diesel vehicles remain uncertain under BS-VI regime, a sizeable number of bookings is for the diesel variant.
Maruti may also face a loss of market share in the fast growing compact SUV space due to lack of diesel models. According to Kotak Institutional Equities, Maruti has lost 190 basis points of market share yearon-year in the current fiscal so far primarily driven by 15 per cent loss of market share in the compact SUV segment. These factors makes it a tough task for it to revive volumes, which may affect its stock valuation.
- Maruti Suzuki Next-Gen Ertiga: When Technology And Style Come Together
- Maruti to launch 1 SUV every 6 months till 2023
- China's economy grows 4.9% as industrial production surges, retail sales rise and unemployment sinks - while the rest of the world is crippled by coronavirus epidemic that started in Wuhan
- Tech earnings could supercharge a greedy stock market
- Sony expects annual profit to drop as gaming business slows
- The Best N95 and KN95 Masks for Sale That Are FDA and CDC Authorized
- Change your own bed sheets and meals dropped by your door: Best Western chief reveals grim Covid protocols faced by travellers forced to quarantine in airport hotels for up to £1,500
- Cara Delevingne's great aunt who scandalised high society: Portrait goes up for sale of Viscountess Castlerosse who bedded Churchill AND his son, bought 250 pairs of shoes at time and said she could turn gay men straight
- GameStop stock soars AGAIN in pre-market action as Robinhood trading platform is forced to raise $1 billion and borrow hundreds of millions more to have on hand to pay customers as 'Wolves of Reddit' amateur traders are compared to 'disruptor' Trump
- The cheapest Nintendo Switch bundles, deals and sale prices in January 2021
- EXCLUSIVE: Meet Roaring Kitty - the stock picking wizard who sparked buying frenzy by tipping GameStop shares on Reddit: Boston suburban dad with $650,000 home emerges as the man who cost Wall Street billions
- Cabinet wrangling over draconian 'quarantine hotels' rules 'goes to the wire' as ministers warn taxpayers face having to foot the bill for returning Britons who cannot pay £1,500 for a week - and it could take TWO WEEKS for system to get running
- Britons escaping lockdown with jaunts to Dubai are set to be among the first to face 10-day £1,500 hotel quarantine as Boris Johnson TODAY unveils list of 'high risk' nations hit by new restrictions
- Flashback: Biden’s DHS Nominee Tied to China, Visas-for-Sale Swamp Scandal
- Comcast lifts uploads to 5Mbps amid complaints its low-income plan is too slow
- The complete moron’s guide to GameStop’s stock roller coaster
- The sad, slow death of Lego Dimensions
- Price hikes in wings as businesses fend off cost pressures
- SEC to probe Reddit-driven stock rallies, GameStop purchase bans
- Robinhood starts SELLING users' shares without permission: Trading platform is hit with massive class-action after restricting trades on stocks including GameStop, Nokia, AMC and Blackberry
Maruti stock to face pressure on slowing sales, diesel pullback have 836 words, post on economictimes.indiatimes.com at December 4, 2019. This is cached page on Talk Vietnam. If you want remove this page, please contact us.