Maruti Suzuki India, India’s largest passenger vehicle manufacturer, is expected to report a sharp drop in profit from a year ago when it declares its third-quarter results on January 25. However, earnings may double from the previous quarter.
Experts said India’s automobile industry still faces supply-side challenges and higher input costs, which will negate the impact of price increases and may impact the sector’s performance in the three months ended December. Maruti is no exception and is likely to have another subdued quarter, they said.
Maruti may report a 50-70 percent year on-year decline in consolidated net profit to Rs 1,000 crore in the third quarter of FY22. Sequentially, profit may double from the previous quarter.
Brokerages expect consolidated revenue to decline 3-4 percent on year and remain in the range of Rs 22,300 crore to Rs 23,500 crore. On a sequential basis, revenue may grow 9-14 percent.
The company reported a net profit of Rs 1,941 crore on consolidated revenue of Rs 23,458 crore during the corresponding period last year. Net profit during the previous quarter was Rs 475.3 crore and revenue was Rs 20,539 crore.
Axis Securities expects Maruti to report a 13 percent decline in sales volumes to 430,668 units from a year ago. From the preceding quarter, this would be a 13 percent increase.
“Semiconductor shortage continued to impact volumes in the third quarter, driving 13 percent YoY decline. Export mix was higher at 15 percent in this quarter vs 6 percent in the same quarter a year ago, but marginally below 16 percent recorded in the preceding quarter,” Axis Securities said in a report.
Selling price
It expects consolidated revenue for the maker of some of the highest-selling models to decline by ~3 percent from a year ago to Rs 22,740 crore. Sequentially, it expects revenue to increase 11 percent.
“We expect 2.4 percent QoQ decline in ASP (average selling price) but an improvement of 11.6 percent YoY largely due to one-off benefit of higher spares revenue in the previous quarter,” Axis added.
In terms of key variables on a QoQ basis, the price increase of about 2 percent would be partly offset by a weaker mix – lower share of models such as Baleno, Brezza and Ertiga. Discounts offered were lower by Rs 4,000 per vehicle from the previous quarter.
“Commodity costs remained elevated in the quarter, and despite consistent price increases, there would still be some under-recovery for most of the players in the automobile sector,” Centrum Institutional Research said.
Sequentially, input prices rose further in the quarter, with steel up 6 percent, aluminium higher by 14 percent, rubber up 2 percent and crude oil up 9 percent.
Axis forecasts an Ebitda (earnings before interest, taxes, depreciation and amortisation) of Rs 1,520 crore, which is a 32 percent decline on-year and 77 percent improvement on-quarter.
“Ebitda margin is set to improve sequentially aided by benefits of price hikes and some normalisation of commodity costs combined with operating leverage benefits,” Axis said.
An Ebitda margin of 6.7 percent would be an improvement of 250 basis points from the 4.2 percent margin reported in the previous quarter. On a yearly basis, the margin may decline by 280 bps.
Axis expects Maruti to post a net profit of ~Rs 1,000 crore for the quarter, a decline of 49 percent on-year and a twofold increase from the previous quarter.
Kotak Institutional Equities expects revenue to remain flat YoY after a 15 percent YoY increase in the ASP due to price hikes over the past few quarters and a richer product mix, and a 13 percent YoY decline in volumes due to the chip-shortage issue.
Ebitda margin
It expects the automobile company to report revenue of Rs 23,466 crore for the quarter, which is an increase of ~14 percent on-quarter but on a YoY basis, revenue is likely to remain flat.
Ebitda is seen declining by ~40 percent on-year to Rs 1,341 crore for the quarter, a sequential growth of ~57 percent.
“We estimate Ebitda margin to increase by 150 bps QoQ led by (1) operating leverage benefits, (2) 20 bps improvement in gross margins mainly on account of lower discounts (as a % of ASP) due to higher retail sales, and (3) cost-cutting initiatives,” Kotak said.
The Ebitda margin for the quarter is likely to come in at 5.7 percent, resulting in a profit of Rs 1,021 crore in the quarter. This is an improvement of 114.7 percent on quarter but a YoY decline of 47 percent.
Motilal Oswal expects the ASP to improve by 9.8 percent on-year, although a 13 percent decline in volumes is likely to result in a YoY decline of 4.6 percent in consolidated revenue at Rs 22,373 crore. Sequentially, revenue is seen improving by ~9 percent.
Maruti Suzuki shares fell 1.7 percent to Rs 8,052.30 at the close on the National Stock Exchange on January 24. The stock was little changed over the past one year and generated 10 percent returns in the past month.
