Maruti Suzuki Q1 Results: Brokerages Expect Sharp Drop in Profit, Margins

Maruti Suzuki India Ltd, country's largest passenger vehicle maker, is all set to announce its earnings for the first quarter June (Q1) on Friday, i.e. 26 July. Analysts are not very positive and expect the company to post a double-digit decline in both net profit and revenue, along with steep contraction in margins during the June quarter.

Kotak said Maruti Suzuki’s revenue is expected to decline 14% year-on-year in the June quarter, though the fall may be offset by 4% increase in average sale price (ASP) due to an increase in costs owing to new safety regulations.

Ebitda (earnings before interest, tax, depreciation and amortization) is likely to decline 42% year-on-year in the June quarter led by a rise in commodity costs, negative operating leverage and high fixed costs in the Gujarat plant due to low volumes, said Kotak. Margins may fall by a sharp 490 basis points to 10% in Q1, the brokerage added.

Another brokerage house, Narnolia, expected Maruti Suzuki’s revenue to decline 13% year-on-year largely driven by the contraction in volume growth, but said realisation will improve 6% on account of better product mix and price hikes.

Ebitda could fall more than 40% year-on-year and margin may contract in three digits (in terms of basis points) due to higher discounts and industry-wide slowdown, it added.

According to Motilal Oswal, Maruti’s margin could decline 470 basis points year-on-year (down 30 basis points quarter-on-quarter) mainly due to higher discounts and operating deleverage. The brokerage house expects Ebitda to decline by 42% year-on-year.

Analysts said that key issues to watch out for would be channel inventory, discounting trends, new launches and demand trend in urban and rural areas.

Notably, Maruti Suzuki sold 4.01 lakh units in the June quarter, lower by 18% compared with the year-ago quarter and down 12% sequentially.

At 11:23 am, shares of Maruti Suzuki were trading at Rs 5,745 apiece, down 0.2%, on BSE after hitting an intra-day low of Rs 5,683.90. The stock has corrected nearly 39% in the last one year.