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INVESTORS with a medium-term perspective can consider adding Maruti Udyog (MUL) to their portfolio of stocks.

Despite the spurt in price during the last few sessions, the stock continues to exhibit potential for returns in the medium term. At Rs 433, the stock is trading at a price to earnings multiple of 14 times the per share earnings for the year ended March 2005.

This recommendation takes into the account the company's market leadership position, strong support from Japanese partner Suzuki Motor Corporation and the potential for a renewed surge in sales from its proposed new models, principal of which will be the new Suzuki Swift.

MUL's bottomline grew by over 57 per cent during the last fiscal, though topline growth and sales volume growth was restricted to 19.7 per cent and 13.6 per cent respectively. The results are a clear pointer to the company's success at reining in costs. It is even more significant and creditable that this profitability growth was pulled off during a year when inputs costs and overheads have been threatening to affect the performance of many companies in India Inc.

Maruti is only set midway through its cost cutting plan called Challenge 50 and the potential for a further improvement in cost efficiency still exists. Another big factor that could go MUL's way this year will be the launch of the small car - Suzuki Swift - later this month.

With internal sales projections for the Swift set at about 5,000 cars per month, this contemporary small car may turn out to be the turning point in MUL's war with the competition that has been eating into its market share.

S. Muralidhar

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