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Indian auto leaders rank among world’s most pricey

India is the world’s fourth largest automobile market, but sales have been falling since last year.

, ET Bureau|
Oct 15, 2019, 08.38 AM IST
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Indian auto companies historically fetched superior P/E multiples than global peers.
ET Intelligence Group: Indian auto stocks remain among the most expensive in the world, even though the sector is going through one of its worst slowdowns in history.

Maruti Suzuki, TVS Motor, Tata Motors, Bajaj Auto and Hero Moto-Corp figure among the top 15 mostexpensive global auto stocks based on their price to estimated earnings for the current fiscal year, show Bloomberg data. The median P/E of the five Indian automakers was 23 times the projected earnings, nearly double of the global average.

India is the world’s fourth largest automobile market, but sales have been falling since last year. According to IHS, the volume drop was the most after China in first half of 2019.

However, on returns, the Indian auto companies have been in line with their global counterparts in the past one year. India’s largest carmaker, Maruti Suzuki, is trading at 30 times FY20 estimated earnings, and is the fourth most expensive automotive stock in the world after Ferrari and China’s BYD and Beiqi Foton.
auto-graph

Volume growth at Maruti Suzuki is expected to contract 10-15 per cent in the current fiscal year, the first decline in six years. The Street has been expecting the second half to be better than the first. However, initial sales volume from the festival season has not been encouraging despite record high discounts on vehicles. Maruti’s volumes dropped 24 per cent to 7.4 lakh units in the first half of FY20.

Passenger cars sales in September dropped 33 per cent to 1.32 lakh units, the eleventh consecutive month of decline. The volume drop for motorcycles in September was the worst on record, even as truck sales fell the most since January 2009.

Indian auto companies historically fetched superior P/E multiples than global peers, thanks to faster growth, better operating margins and higher return on equity. The median operating margins and return on equity of Indian automakers were 11.15 and 24.3, respectively, in the last five years, compared with the global average of 14.2 and 4.99.

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