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.