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Maruti Suzuki: The Rs 125 stock that hit Rs 10,000 in 14 years

If you were among the lucky few who got subscription to and have held on to this stock, you would now be sitting on a whooping near 8,000% return. Back in 2003, the government divested 25 per cent stake in Maruti Suzuki Limited (Maruti Udyog Limited as it was known then) at Rs 125 per share. The stock debuted on the exchanges on July 09, 2003 and ended the first trading at Rs 164 levels, nearly 32 per cent higher than the issue price.

The near 8,000% rally in this stock in the last 14 years is a classic example of consumption boom in India, analysts say.

A recent Motilal Oswal study puts Maruti among the top five wealth creators during 2012 - 17, pegging the wealth created at Rs 1.41-lakh crore in this period.

With a market share of over 50 per cent in the domestic passenger vehicle market, Maruti now boasts of Alto 800, Alto K10, A-star, Estilo, WagonR, Ritz, Swift, Swift DZire, SX4, Eeco, Grand Vitara and Ertiga amongst its offerings.

Earnings and profits, too, have kept pace. From Rs 11,104.7 crore in FY04, consolidated gross sales have surged 596 per cent in FY17 – a compounded annual growth rate (CAGR) of 16 per cent, as per ACE Equity data. Profit after tax (PAT) at Rs 560.9 crore has grown to Rs 7,338.2 crore – a CAGR of 22 per cent during this period, data show.

In a bull case scenario, they expect the stock to hit Rs 14,400 going ahead if domestic volumes rebound quickly, new capacity (in Sanand, Gujarat) ramps up quicker-than-expected and all new models do well. Volume growth in FY18 is pegged at 15% and 18% in FY19. Their base case target price for the stock is Rs 10,563 and Rs 4,950 in case of a bear market.

“Given the improvement in market share, rising rural contribution, reduced Japanese yen exposure, improving share of premium products, healthy ROE/ROCE (26% in FY19/20E) and improving free cash flows, MSIL will continue to trade at a premium,” 

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