Rajeev Thakkar of PPFAS Mutual Fund presented his in-depth investment thesis on Suzuki Motor (Tokyo: 7269; OTC: SZKMY) at Asian Investing Summit 2018.

Thesis summary:

Suzuki Motor Corp. is a play on the underpenetrated Indian auto market. India accounts for ~ 2/3 of the profits of Suzuki Motor. Penetration in India is 22 cars per 1,000 persons, as compared to 102 in China, 569 in Western Europe, and 808 in the U.S., based on OICA data for 2016. Maruti Suzuki (56.2%-owned by Suzuki Motor Corporation) sells almost one of every two cars in India. It participates in the high-growth Indian market and benefits from the gradual shift towards higher-value premium cars.

India has been a tough market for other players to profit from, as seen by the difficulties faced by General Motors, Volkswagen, Toyota, and Ford. Maruti Suzuki benefits from scale efficiencies and a wider network; it is the incumbent and has been in the market since 1981, as compared to the relatively recent entry of other players. Suzuki Motor benefits not only from the 56.2% stake in Maruti but also gets significant royalty income from Maruti. Apart from participation in the Indian auto space, Suzuki Motor has optionality in the Japanese, ASEAN, and European markets in which Suzuki operates.

The shares trade at a P/E of ~13.5.

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About the instructor:

Rajeev Thakkar possesses over 24 years of experience in various segments of the Capital Markets such as investment banking, corporate finance, securities broking and 15 years of experience managing clients’ investments in equities. His tenure at PPFAS began in 2001. He managed the equity investments of the Portfolio Management Service from 2003 to 2013 and since 2013 has been managing PPFAS Mutual Fund’s “Parag Parikh Long Term Equity Fund”. Rajeev is a strong believer in the school of “value-investing” and is heavily influenced by Warren Buffett and Charlie Munger’s approach. He is a Chartered Accountant, Cost Accountant and a CFA Charterholder.