Maruti sales boost Suzuki Motor Corp’s April-June results

A surge in overall automobile sales – and Maruti Suzuki’s passenger vehicle numbers – in India in the April-June 2015 quarter has helped Suzuki Motor Corporation post a 13.2% rise in operating income from its automobile business to Rs 2,790 crore (¥53.6 billion), while the company’s net global automotive sales grew 10% to nearly Rs 36,000 crore (¥691.9 billion) .

As a result, the consolidated net sales of Suzuki (across its automotive, motorcycle and marine and power products) grew 8.8% to Rs 40,190 crore (¥772.9 billion). Of this, sales in Japan were down 3.4% to Rs 12,860 crore (¥247.3 billion), while the overseas net sales grew nearly 16% to Rs 27,330 crore (¥525.6 billion) in Q1, FY2016.

In the motorcycle business, net sales decreased by 7.2% to Rs 3,160 crore (¥60.9 billion) year-on-year mainly due to the decrease in sales in North America and Asia. The operating income of Rs 52 crore (¥1.0 billion) in the corresponding period of the previous fiscal year became an operating loss of Rs 130 crore (¥2.6 billion).

India is one of the largest overseas automobile markets for Japan’s Suzuki, with the Maruti Suzuki brand enjoying an overwhelming 53% share in the Indian car market.

Private hedge fund buys stake in Suzuki Motor Corp
In another significant development, Third Point, a New York-based private hedge fund run by David Loeb, said it had acquired a stake in Suzuki, news agency Bloomberg reported today. The size of the stake was not disclosed.

In his second quarter investor letter, David Loeb said, “Most of Suzuki’s intrinsic value originates from the company’s 56% stake in its consolidated subsidiary, Maruti Suzuki, which is listed in India with a $20 billion market capitalization. Maruti has an unmatched network of dealerships and service shops in India, providing low-cost and more reliable servicing to customers, and a sustainable scale-based advantage over its competitors. Suzuki also receives a 5.5% royalty stream on all Maruti sales. This royalty stream is often overlooked by investors.

By our estimates, Suzuki’s Indian assets – the publicly-traded Maruti stake, the royalty stream, and Suzuki’s 100%-owned Gujarat plant (which will produce one million vehicles annually and become an emerging markets export hub over time) – are worth more than the parent company’s entire market capitalisation.

To make this proposition even more appealing, we expect meaningful additional value appreciation for Suzuki’s Indian assets. The Indian automotive market remains one of the last global opportunities for open-ended secular growth with less than 2% of the population owning passenger cars. After an unusually long downturn from 2011–2014, the nation’s automotive cycle has turned, supported by low oil prices, accommodative monetary policy, and the reform and infrastructure investment agenda of Narenda Modi’s government.”

Suzuki’s stock touched record highs in Tokyo trading today, while Maruti Suzuki shares also ended up 2.4% on the National Stock Exchange.

Also read: Maruti Suzuki India powers July sales with 22% YoY growth