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Shabbir is an online entrepreneur in the field of Internet Marketing and is devoted to optimization and usability of his websites. Apart from doing trading he blogs about Internet Marketing Tips @imtips.co

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Should I invest in Maruti

Maruti Udyog Ltd. (MUL) is the first automobile company in the world to be honoured with an ISO 9000:2000 certificate. The company has a joint venture with Suzuki Motor Corporation of Japan. It is said that the company takes only 14 hours to make a car.

The objectives of MUL then are as cited below:

  • Modernization of the Indian Automobile Industry.
  • Production of fuel-efficient vehicles to conserve scarce resources.

EPS and fair valuations

Year-end March Mar ’04 Mar ’05 Mar ’06 Mar ’07 Mar ’08
Earning Per Share (Rs) 18.76 29.55 41.16 54.07 59.91

Now if we use the above EPS and apply DCF to calculate fair value of share price at 4% growth of company for at least 3 years we get the following

After 1 year(s) EPS = 62.31 ( Which is Expected result for Maruti for Mar 09 soon )
After 2 year(s) EPS = 64.80
After 3 year(s) EPS = 67.39

The fair value of the stock is much higher than current levels and so investment accumulation of Maruti suzuki at current levels can be a good option.

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