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Automobile sector is directly correlated with general economic growth. Indian automobile sector has shown tremendous growth and flexibility in last couple of years. Mahindra, Tata, Maruti, and many others including foreign players such as Hyundai, Ford, GM, and Skoda have made India their home for production of small cars.
Even though automobile sector looks good in terms of growth potential, all is not equally well with various players. In this article, we took a look at margins of various automobile companies in India and found huge differences in the margins.
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COMPANY
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GPM %
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OPM %
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NPM %
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TATA MOTORS LIMITED
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17.49
|
9.81
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3.78
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BAJAJ AUTO LIMITED
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23.36
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19.78
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20.3
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MAHINDRA&MAHINDRA
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22.08
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14.65
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11.34
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HERO MOTOR CORP.
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20.54
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13.43
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9.97
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MARUTI SUZUKI INDIA LTD
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13.17
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9.5
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6.25
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ASHOK LEYLAND
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16.43
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10.67
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5.53
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EICHER MOTORS
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21.35
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10.17
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17.06
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HMT LTD
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-12.32
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-25.29
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-39.43
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TVS MOTOR CO. LTD
|
15
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4.92
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3.14
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ESCORTS LTD
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14.5
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5.01
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3.7
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Bajaj auto and Eicher Motors has the best margin among all the automobile players while TVS motors, Tata motors, and Escorts Ltd have the lowest.
M&M has maintained very good gross margin but their net margin is lower than Bajaj and Eicher. M&M can improve its operating margin in a big way. M&M’s selling and marketing expenses is very high at 7% of the revenue while the same is 3% for Bajaj. Though both have very different positioning objective, what investors should look for is the money on the table in the form of dividend and EPS.
Similarly, Hero Motor Corp, while maintaining a very good gross margin, has a high selling and marketing cost at 6.5% of the revenue.
We will further go deeper into few of these companies in our next post and see what is worth investing at current market price. |
