Maruti vs. Hyundai: EPIC Investment BATTLE! 

Hello everyone Rahul Shah here, trying to make invesing accessible and profitable for the average investor.

Today, we're diving into a fascinating showdown between two giants of the Indian auto industry: Maruti Suzuki and Hyundai.

On the roads, Maruti has always had a clear lead, right? But what about the stock market?

For a long time, Maruti was the only choice for investors.

But with Hyundai's recent India listing, the game has changed!

Now that both are listed, the big question is: Which one will create more wealth for you, the shareholder? Let's find out!"

"To answer that, let's start by looking at their past performance.

Since Hyundai's detailed financial data is available from FY19, we'll begin our comparison from that year onwards.

When it comes to sales and profits, both companies have been neck and neck. Between FY19 and FY25, a six-year period, Hyundai's sales grew by 50%.

So, if they sold Rs 100 worth of cars in FY19, that became Rs 150 by FY25. On the profit front, Hyundai more than doubled its net profits, going from Rs 2,600 crores to Rs 5,500 crores in the same period.

That's a 50% jump in sales and over 100% in profits for Hyundai."

"Now, let's look at Maruti. In the same FY19 to FY25 period, Maruti's sales grew by a solid 78%, while its net profits increased by 90%.

So, to summarize: Hyundai saw 50% sales growth and 110% profit growth. Maruti, on the other hand, had 78% sales growth and 90% profit growth.

What does this tell us? Maruti clearly had an edge in growing its sales, while Hyundai did slightly better when it came to boosting its profits. It's a close call here, isn't it?"

"Next, let's talk about a super important number for investors: Return on Equity, or ROE. A company that consistently earns an ROE higher than 15% is often seen as a true wealth creator.

High ROE means a company can grow without needing to borrow too much, and it can also pay out regular dividends. It's vital for both profit growth and rewarding shareholders.

So, where do Maruti and Hyundai stand? Are their ROEs consistently above 15%? At first glance, the answer is yes for Hyundai, and not quite for Maruti.

Hyundai has an impressive average ROE of 26% between FY19 and FY25. Maruti, however, averaged just 12% during the same time. This means Hyundai's ROE was more than double Maruti's! That's a significant difference, pointing towards Hyundai in this round."

"But hold on, there's a twist! These ROE numbers are just the first look. If we dig a little deeper, things get very interesting.

Maruti's balance sheet is huge, around Rs 1,30,000 crores. And guess what? More than half of that, Rs 66,000 crores, is parked in investments! Think of it this way: if Maruti launched its own mutual fund, it would be amongst India's largest equity funds!

And it's this massive investment pile that's pulling down its overall ROE.

If we recalculate Maruti's ROE, ignoring these investments and the income they generate, its average ROE jumps to an incredible 35%! Now that makes Maruti look like a genuine long-term wealth creator!

But Hyundai has its own hidden gem. It also sits on a huge pile of cash. If we exclude this cash and its income, Hyundai's ROE gets a massive boost too! Are you ready for this? It comes in at a staggering 114%! Yes, you heard that right, 114%!

So, after adjusting for these factors, both companies emerge as true wealth creators, capable of growing without much debt and paying consistent dividends. However, based on historical numbers and adjusted figures, Hyundai still holds a significant edge when it comes to return on equity."

"Now, let's talk about valuations - what price are you paying for these companies? It's pretty close between these two auto giants. Maruti currently trades at a Price-to-Earnings, or PE, multiple of 27 times. Hyundai is just slightly ahead at 29 times.

Hyundai doesn't have a long history on the stock market yet. But Maruti does. And here's something to note: Maruti is actually trading at a discount to its own historical average. Its 10-year median PE ratio is 37 times, compared to its current 27 times. This suggests Maruti might be cheaper right now compared to its past.

So, despite Hyundai having better profit growth and impressive return ratios, it's trading almost at the same valuation as Maruti. Does this mean Hyundai offers a better risk-reward at current levels?"

"Well, we've looked at historical numbers, but as they say, if history was all there was to investing, the richest investors would be librarians! We need to consider the future. And both these companies have very strong plans.

Hyundai is focused on ramping up production and building a strong after-sales network. For EVs, they've already launched their first locally produced electric vehicle and plan five more models by 2030.

They're also expanding charging stations to 485 by 2030 and building a battery assembly plant, which will be ready in 2025. Hyundai is already a trusted brand, so their IPO timing seems perfect.

Maruti India, the largest passenger vehicle player, is known for its affordable cars. But they are shifting gears, introducing more premium segment cars. They're also investing heavily to expand production capacity to 4 million units by 2030. Plus, they've teamed up with Toyota to make EVs for India.

Both companies are pushing into SUVs, EVs, and exports. Maruti is leveraging its scale and reach in rural areas, while Hyundai is focusing on technology and financial efficiency."

"So, predicting who will be the bigger wealth creator is tough! It is honestly quite tough.

Maybe it's a case for having both in your portfolio.

Or perhaps, with the auto industry becoming even more competitive, maybe you'd consider other options.

I hope I've provided you with enough information to come to a decision of your own.

What's your pick for participating in the Indian auto growth story? Let me know in the comments below!

If you found this video useful, please don't forget to like, share, and subscribe to the channel! I'll see you again next time. Goodbye and happy investing!"