I had discussed about super-expensive valuations of Maruti Suzuki Ltd's stock at current prices of over Rs.3600/- per share in my previous article. In this article I won't be getting into that part again. Here I will be focusing on the Sales performance of Maruti Suzuki in two crucial segments: Premium Hatchbacks and Compact Sedans.
In total, Maruti sells about 1 lakh cars every month. 38-40% of these are from the Alto & Wagon-R category. Another 35-38% comes from the Ritz/Swift/Dzire category. 10-11% comes from Omni/Eeco category. 5-6% from Ertiga/Gypsy category. And the rest is comprised by it's recent launches, i.e. Celerio and Ciaz, which is about 8-10% of total sales.
The Ritz/Swift/Dzire category brings in the maximum in terms of turnover & profits for Maruti Suzuki Ltd. And this is where the company is facing lots of competition from other manufacturers. Hyundai is particularly strong in the Premium hatchback segments with it's i10 Grand and i20 Elite models with the latter generating volumes that are getting closer & closer to Swift's monthly volumes, despite being larger and more expensive. Even the Grand i10 is doing pretty healthy volumes for Hyundai at over 8000 units every month. On the other hand, Maruti's Ritz is a dying product with the volumes having come down to less than 2000 units per month in the last couple of months. Hyundai & Maruti together control about 75% of the Premium Hatchback market with a tough fight for the No.1 spot. Tata Motors with it's Indica/Vista & the Bolt models is the distant third, but has seen it's market share improve from less than 6% in October'14 to about 9% in March'15.
In the following chart I have considered monthly market shares of Hyundai India, Maruti Suzuki & Tata Motors only, which together command around 85% of the total market.
Maruti Suzuki's market share has dipped sharply to under 34% in March'15 from levels of around 42% in Dec'14 & Jan'15. On the other hand Hyundai's market share has approached the 40% mark, beating Maruti Suzuki for the 2nd time in the last 6 months. In October, Maruti's Swift sales had seen a sharp dip mainly because the company was clearing older stock & introducing newer upgraded model in that month. But there was no such issue in March'15. Part of the reason is fall in sales of Ritz model and even Swift has seen a dip of around 15% M-o-M. Apart from Hyundai, even Tata Motors is gaining some strength, though the numbers are far lower. And the reason is not the newly launched Tata Bolt model, but the older Indica/Vista models. After sales dipping to less than 2000 units in Jan'15, the Indica/Vista models have seen a revival in sales to over 3700 units in Mar'15. Bolt has been a disappointment for the company in the first few months. We will have to wait & see if it is because of supply constraints or lack of demand for the model, in the coming months. It seems as if the advertising being done for Zest & Bolt models is pulling customers into the showrooms, but they are getting more impressed with the value-for-money offerings in Indica/Vista and the Indigo CS models.
Coming to Compact Sedans segment, Maruti's Swift-Dzire is the clear market leader with a huge lead. In fact, many a times, the Dzire does monthly volumes higher than even the Swift and this is even more profitable for Maruti Suzuki, which commands over 45% market share in this segment. The 2nd biggest player in this segment is Honda with it's Amaze, which has seen a smart revival in sales in the last 4 months, but still does less than half the volumes of the Dzire. Honda captured a little over 20% market share in March'15. Tata Motors came third with just under 15% market share with it's two models: Indigo eCS and the newbie Zest. Here too the older model is selling more than the newer one.
From the chart we can see that Maruti Suzuki's market share in the Compact Sedans segment has come down from over 50% level to about 45% in the last 3-4 months. But it's not due to fall in Dzire's sales. It's monthly numbers are quite steady. But the market is expanding due to increased volumes from other players. Look at Honda, which has doubled it's market share in the last 4 months. Tata Motors too is more or less steady near the 14-15% mark. Hyundai's Xcent too is doing steady numbers and it's market share too is hovering around the 10% mark. But there is something all these manufacturers need to worry about and that is the upcoming launch of the Ford Figo Aspire, which is a brand new Compact Sedan Ford has developed and will be manufactured at it's brand new facility at Sanand, Gujarat. Ford is aiming for healthy volumes from this model and the car also seems to be competent enough to do it. It's expected to be launched sometime in June'15.
Tata Motors too is said to be developing a new Compact Sedan on the 'Kite' platform, which could replace the existing Indigo eCS or add to the product portfolio. But it's launch is atleast a year away. But Tata Motors is on it's revival path and is looking at expanding it's dealer network, which had shrunk sharply over the last 3-4 years. And this time the company is serious about it's domestic car business.
In short, Maruti Suzuki has lot's to worry about the two segments which give it the maximum turnover and profits. And in such a situation, commanding such premium valuations for too long might not be possible. Many institutional brokerages have a Buy rating on Maruti Suzuki with target prices in the range of Rs.4000 to 4500. But I beg to differ. If the sales blip in March is anything to go by, Maruti could be struggling to post the 15+% growth that it needs to post to make the current valuations sound a bit sensible. And it's premium offering Ciaz needs to continue doing well.
( Click here for Maruti Suzuki's Results Summary Page. )
The Ritz/Swift/Dzire category brings in the maximum in terms of turnover & profits for Maruti Suzuki Ltd. And this is where the company is facing lots of competition from other manufacturers. Hyundai is particularly strong in the Premium hatchback segments with it's i10 Grand and i20 Elite models with the latter generating volumes that are getting closer & closer to Swift's monthly volumes, despite being larger and more expensive. Even the Grand i10 is doing pretty healthy volumes for Hyundai at over 8000 units every month. On the other hand, Maruti's Ritz is a dying product with the volumes having come down to less than 2000 units per month in the last couple of months. Hyundai & Maruti together control about 75% of the Premium Hatchback market with a tough fight for the No.1 spot. Tata Motors with it's Indica/Vista & the Bolt models is the distant third, but has seen it's market share improve from less than 6% in October'14 to about 9% in March'15.
In the following chart I have considered monthly market shares of Hyundai India, Maruti Suzuki & Tata Motors only, which together command around 85% of the total market.
Maruti Suzuki's market share has dipped sharply to under 34% in March'15 from levels of around 42% in Dec'14 & Jan'15. On the other hand Hyundai's market share has approached the 40% mark, beating Maruti Suzuki for the 2nd time in the last 6 months. In October, Maruti's Swift sales had seen a sharp dip mainly because the company was clearing older stock & introducing newer upgraded model in that month. But there was no such issue in March'15. Part of the reason is fall in sales of Ritz model and even Swift has seen a dip of around 15% M-o-M. Apart from Hyundai, even Tata Motors is gaining some strength, though the numbers are far lower. And the reason is not the newly launched Tata Bolt model, but the older Indica/Vista models. After sales dipping to less than 2000 units in Jan'15, the Indica/Vista models have seen a revival in sales to over 3700 units in Mar'15. Bolt has been a disappointment for the company in the first few months. We will have to wait & see if it is because of supply constraints or lack of demand for the model, in the coming months. It seems as if the advertising being done for Zest & Bolt models is pulling customers into the showrooms, but they are getting more impressed with the value-for-money offerings in Indica/Vista and the Indigo CS models.
Coming to Compact Sedans segment, Maruti's Swift-Dzire is the clear market leader with a huge lead. In fact, many a times, the Dzire does monthly volumes higher than even the Swift and this is even more profitable for Maruti Suzuki, which commands over 45% market share in this segment. The 2nd biggest player in this segment is Honda with it's Amaze, which has seen a smart revival in sales in the last 4 months, but still does less than half the volumes of the Dzire. Honda captured a little over 20% market share in March'15. Tata Motors came third with just under 15% market share with it's two models: Indigo eCS and the newbie Zest. Here too the older model is selling more than the newer one.
From the chart we can see that Maruti Suzuki's market share in the Compact Sedans segment has come down from over 50% level to about 45% in the last 3-4 months. But it's not due to fall in Dzire's sales. It's monthly numbers are quite steady. But the market is expanding due to increased volumes from other players. Look at Honda, which has doubled it's market share in the last 4 months. Tata Motors too is more or less steady near the 14-15% mark. Hyundai's Xcent too is doing steady numbers and it's market share too is hovering around the 10% mark. But there is something all these manufacturers need to worry about and that is the upcoming launch of the Ford Figo Aspire, which is a brand new Compact Sedan Ford has developed and will be manufactured at it's brand new facility at Sanand, Gujarat. Ford is aiming for healthy volumes from this model and the car also seems to be competent enough to do it. It's expected to be launched sometime in June'15.
Tata Motors too is said to be developing a new Compact Sedan on the 'Kite' platform, which could replace the existing Indigo eCS or add to the product portfolio. But it's launch is atleast a year away. But Tata Motors is on it's revival path and is looking at expanding it's dealer network, which had shrunk sharply over the last 3-4 years. And this time the company is serious about it's domestic car business.
In short, Maruti Suzuki has lot's to worry about the two segments which give it the maximum turnover and profits. And in such a situation, commanding such premium valuations for too long might not be possible. Many institutional brokerages have a Buy rating on Maruti Suzuki with target prices in the range of Rs.4000 to 4500. But I beg to differ. If the sales blip in March is anything to go by, Maruti could be struggling to post the 15+% growth that it needs to post to make the current valuations sound a bit sensible. And it's premium offering Ciaz needs to continue doing well.
( Click here for Maruti Suzuki's Results Summary Page. )
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