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Maruti stock defies fundamentals, hits 52-week low

Defying fundamentals, the stock price of the country's largest car maker Maruti Suzuki today hit a 52 week low of Rs 3,372, a drop of 30 per cent from its all time high of Rs 4,789 seen in November last year. The 30 per cent drop has trimmed the company's market cap by about Rs 41,000 crore. The stock closed at Rs 3,409 on the Bombay Stock Exchange on Friday, down 0.42 per cent even as the BSE Sensex went up by 0.78 per cent. In last one month alone the stock has lost 17 per cent value.

There have been some recent dampeners. Maruti Suzuki had seen a low growth of 0.8 per cent in January domestic sales. The company had attributed this to a lower number of working days last month, leading to lower output. February growth is also likely to remain muted. In February, the company lost two days of production or about 10,000 units due to the component supply disruption created by the Jat agitation in various parts of Haryana. The company was forced to shut operations at both its plants -- Gurgaon and Manesar -- in Haryana. Maruti may see a flat performance in February sales number. The company had seen a growth of 8.2 per cent in domestic sales last year February.

Maruti, which enjoys a 46 per cent share in the domestic passenger vehicle market (car, vans and utility vehicles) has posted a 12.4 per cent sales growth in April-January period of the financial year. In fact, it happens to be amongst a handful of companies to report double digit growth in sales. Considering the high growth rate, Maruti could also face a capacity constraint next financial year, before its third plant becomes operation in Gujarat in early 2017.

Analysts following the company are not worried. "Stocks react positively or negatively to ups and downs in the market. While the stock has corrected, fundamentally nothing has changed except a setback due to recent temporary shutdown that was outside company's control. Demand remains strong and operating profit is good. We are positive on the outlook", said Jinesh Gandhi, senior vice president (research) at Motilal Oswal. The company has reported 41.6 per cent growth in net profit during April-December period of FY16 to Rs 3,437 crore.

Maruti Suzuki had replaced Tata Motors as the most valuable domestic automobile company (by market cap) in July last year. Maruti remains the most valuable automobile company, even ahead of Japanese parent Suzuki Motor Corporation. However, the gap between Maruti and Tata Motors' market cap which stood at a high Rs 28,000 crore in November is now down to about Rs 16,000 crore.