And ne entrants kia motors mg motor india rank model

was gained by its’ competitors, both established players (Hyundai, M&M, etc.,) and new
entrants (Kia Motors & MG Motor India).
Rank Model No. of Units Sold
1 Maruti Suzuki Dzire 2,09,657
2 Maruti Suzuki Alto 2,08,087
3 Maruti Suzuki Swift 1,91,900
4 Maruti Suzuki Baleno 1,83,863
5 Maruti Suzuki Wagon – R 1,55,967
6 Maruti Suzuki Vitara Brezza 1,31,732
7 Hyundai Elite i 20 1,23,181
8 Maruti Suzuki Eeco 1,14,105
9 Hyundai Grand i 10 1,02,693
10 Hyundai Creta 99,736
Source: gaadiwaadi.com (Published on January 7, 2020)
The automotive industry is crucial for the economy as it acc ounts for 7.1% of the country’s
Gross Domestic Product (GDP) and as per Automotive Mission Plan (AMP) 2016 – 26, its
contribution is projected to increase to 12%. India is expected to emerge as the world’s third -
largest passenger vehicle market by 2020. Industry has been growing at around 9.6% CAGR
from 2016-2018 and is currently under pressure due to various factors. Going ahead, it is
expected that growth will gradually pick up from second half of FY21 and may continue
growing at 9%+ rate from the year onwards.

VALUATION
There are three primary equity valuation models: the discounted cash flow (DCF), the cost,
and the comparative (or comparable) approach.We have used DCF Valuation Method and
Comparable Model Valuation Method.
There are two primary comparable approaches.
1.
The first is the most common and looks at market comparables for a firm and its peers.
Common market multiples include the following: enterprise-value-to-sales (EV/S),
enterprise multiple, price-to-earnings (P/E), price-to-book (P/B) and price-to-free-
cash-flow (P/FCF).
2.
The second comparables approach looks at market transactions where similar firms,
or at least similar divisions, have been bought out or acquired by other rivals, private
equity firms or other classes of large, deep-pocketed investors. Using this approach,
an investor can get a feel for the value of the equity.
We are going with the first approach.
Discounted Cashflow valuation with reasonable assumptions as listed in the excel sheet
has valuated share or Maruti at Rs 6104.
Comparative valuation of Maruti with its peers is as below.
Company Name Market Data Valuation
Price EBITDA EBIT Earnings EPS EV/Sales EV/EBIT P/E
(INR/share) (in Crores) (in Crores) (in Crores)
Tata Motors Ltd 163.85 26367.09 2776.46 -34299.97 -84.89 0.40 43.28 -
Maruti Suzuki Ltd 7011.3 16773.9 13753.1 7447.6 253.26 2.46 15.39 28.42
Mahindra & Mahindra Ltd 559.75 17882.96 13892.19 5707.12 48.91 1.13 8.51 11.44
Ashok Leyland 79 5046.71 4371.15 2378.11 7.08 1.10 8.36 11.16
Bajaj 3162.8 6883.75 6618.06 4882.25 170.30 2.99 13.68 18.57
Hero Motocorp 2462.05 5765.92 5141.48 3451.37 172.45 1.84 12.15 14.28
Maruti is clearly over prized compared to any of its industry competitor or sector competitor
on all counts. It trades at an expensive PE of 28 compared to its peers.

FINANCIAL ANALYSIS
Operational Analysis: This is done mainly to check the operational effectiveness of the
enterprise
Particulars Formula 2017 2018 2019 2020E 2021E 2022E 2023E 2024E
Operating Profit
Margin
Operating Profit /
Net Sales
18.6% 17.7% 15.8% 12.1% 12.0% 12.7% 13.0% 13.2%
Net Profit
Margin
Net Profit / Net
Sales
11.0% 9.9% 8.9% 6.0% 5.7% 6.5% 6.8% 7.0%
Gross Profit
Margin
Gross Profit / Net
Sales
31.3% 31.1% 30.0% 29.0% 28.6% 28.9% 29.0% 29.0%
Interpretation:
1. Net Profit margin has fallen from 9.9% to 8.9% in actual YoY basis from 2018 to 2019
2. Operating Profit margin has fallen from 17.7% to 15.8% on YoY basis from 2018 to
2019
Profitability Ratios: These ratios are used by the shareholders and the management to
understand the profitability of the enterprise. Whether the shareholders are able realise any