Maruti stock defies fundamentals, hits 52-week low

Loses Rs 41,000 crore in value since November

Defying the fundamentals, the stock price of the country’s largest car maker, Maruti Suzuki, hit a 52-week low of Rs 3,372 on Friday, down from its all-time high of Rs 4,789 in November last year. The 30 per cent drop has trimmed the company’s market cap by nearly Rs 41,000 crore. The stock closed at Rs 3,409 on the BSE on Friday, down 0.42 per cent from the previous closing, even as the BSE Sensex went up by 0.78 per cent. In past month alone, the stock has lost 17 per cent in value.

There have been some recent dampeners, too. Maruti Suzuki had seen a low growth of 0.8 per cent in January domestic sales. It had attributed this to a lower number of working days last month, leading to lower output. The February growth is also likely to remain muted. In the month, the company lost two days of production or about 10,000 units, due to the component supply disruption created by the Jat agitation in various parts of Haryana. The company was forced to shut operations at both its plants - Gurgaon and Manesar - in Haryana. Maruti might see a flat performance in the February sales number.

The firm had seen a 8.2 per cent growth in domestic sales in February last year.

Maruti, which enjoys a 46 per cent share in the domestic passenger vehicle market (car, vans and utility vehicles), has posted a 12.4 per cent sales growth in the April-January period of FY16. It is among a handful of companies to report double-digit growth in sales. Considering the high growth rate, Maruti could also face a capacity constraint in the next financial year, before its third plant becomes operational in Gujarat in early 2017.

Analysts following the company are not worried. “Stocks react positively or negatively to ups and downs in the market. While the stock has corrected, nothing has changed fundamentally except a setback due to recent temporary shutdown that was outside company’s control. Demand remains strong and operating profit is good. We are positive on the outlook,” said Jinesh Gandhi, senior vice-president (research) at Motilal Oswal. The firm has reported a 41.6 per cent growth in net profit during the April-December period of FY16 at Rs 3,437 crore.

Maruti Suzuki had replaced Tata Motors as the most valuable domestic automobile company by market cap in July 2015. Maruti remains the most valuable automobile company, even ahead of Japanese parent Suzuki Motor Corporation. However, the gap between Maruti and Tata Motors’ market cap, which stood at a high Rs 28,000 crore in November 2015, is now down to about Rs 16,000 crore.