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Informist, Wednesday, Oct. 23, 2024

 

By Darshan Nakhwa 

 

MUMBAI – Maruti Suzuki India Ltd., India's largest passenger vehicle manufacturer, is expected to report muted growth in key earnings parameters for the September quarter, according to analysts. A slight decline in wholesale volumes--due to high inventory and low demand--and higher discounts are likely to weigh on the automaker's earnings. However, a higher share of exports in overall sales and higher average selling price are likely to offset the impact of lower wholesale volumes to an extent, analysts said.

 

The company is expected to earn a net profit of INR 38.09 billion for Jul-Sept, up 2.5% from a year ago, according to the average of estimates from 12 brokerages. The projections for net profit by brokerages ranged from INR 36.33 billion by Nuvama Wealth Management Ltd. to INR 40.29 billion by Elara Securities (India) Pvt. Ltd.

 

Maruti Suzuki's top-line is seen at INR 372.15 billion, up 0.4% from a year ago, according to the average of estimates from 12 brokerages. The highest and the lowest estimates for revenue were INR 385.35 billion by Centrum Broking Ltd. and INR 365.03 billion by Sharekhan Ltd., respectively. 

 

Among the 12 brokerages, Nuvama Wealth, Nomura Equity Research, and Sharekhan expect the automaker's top-line to decline 1%-1.5% on year owing to lower wholesale volumes compared to the year-ago period. Others such as Axis Securities Ltd., KR Choksey Research, Kotak Institutional Equities, Nirmal Bang Equities Pvt Ltd, and YES Securities (India) Ltd expect the revenue to be flat on year.

 

According to Axis Securities, the automaker's total revenue is expected to be flat on year due to lower wholesale volumes. However, the impact of lower sales will be partly offset by a better product mix--higher absolute numbers of sport utility vehicles, light commercial vehicles and export sales. Brokerage Kotak Institutional Equities expects the company's revenue to remain flat on year due to a decline in volumes and higher discounts, which will be offset by a 2% year-on-year increase in the average selling price led by a richer product mix.

 

For Jul-Sept, Centrum Broking Ltd expects Maruti Suzuki to post revenue growth of 4% on year, driven by 5% growth in realisations, which is likely to offset the impact of a 1.9% on-year decline in quarterly volumes. By comparison, Prabhudas Lilladher expects the company's revenue to grow 1.9% on year, led by 4% year-on-year growth in the average selling price. 

 

The company's operating profit, or earnings before interest, tax, depreciation and amortisation, is seen at INR 48.02 billion in Jul-Sept, up 0.4% on year, according to the average of 11 estimates. The estimates for EBITDA ranged from INR 44.96 billion to INR 50.79 billion. 

 

Maruti Suzuki's EBITDA margin is projected at 13% for Jul-Sept compared to 12.9% a year ago, according to the average of estimates from 11 brokerages. The higher profitability is due to a richer product mix, higher average selling price, and marginal operating leverage benefits, they said. Among brokerages, KR Choksey, Nuvama Wealth and Motilal Oswal Financial Services expect the company's EBITDA margin to contract on a year-on-year basis.

 

"We expect EBITDA margins to decline by 66 basis points year-on-year and 69 bps sequentially due to higher discounts, forex impacts, and increased advertising spending, though partly offset by declining steel prices," KR Choksey said in a report. Nuvama Wealth expects the company's EBITDA margin to contract due to higher discounts and lower scale. In Jul-Sept, the company offered discounts of around INR 70,000 on small cars and of INR 25,000-INR 30,000 on utility vehicles, according to Centrum Broking. 

 

For Jul-Sept, Motilal Oswal Financial Services has pegged the company's realisation per car at INR 687,659 and YES Securities has estimated it at INR 667,000 per unit. The company's realisation per unit was INR 671,348 in Jul-Sept last year and INR 680,850 in Apr-Jun this year, according to Motilal Oswal Financial Services.     

 

During the September quarter, Maruti Suzuki's cost of raw materials consumed as a percentage of revenue is expected to have increased to 70.9% from 70.6% a year ago and 70.2% in Apr-Jun, according to Motilal Oswal Financial Services. Prices of aluminium, copper, and natural rubber rose 9-52% on year in Jul-Sept. However, prices of domestic and Chinese cold-rolled coil steel were down 5% and 20%, respectively. On a sequential basis, prices of domestic and Chinese cold-rolled coil steel, aluminium, lead and copper declined 5.5-18.2%. However, prices of natural rubber jumped 20%, according to data from Kotak Institutional Equities. The impact of the change in prices of raw materials is usually reflected in the earnings of automakers, with a lag of a quarter.

 

Maruti Suzuki's total sales fell 1.9% on year to 541,550 units in the September quarter on account of weakness in the mini and compact segments and flat sport utility vehicle despatches over the year-ago period. The company sold 180,535 utility vehicles in India during the quarter, compared to 180,066 units a year ago. Its mini and compact car sales fell 13% on year to 208,184 units. 

 

The company currently offers models such as Grand Vitara, Fronx, Brezza and Jimny in the sport and compact utility vehicles category, while in the mini and compact segments it offers models such as S-Presso, Baleno, Dzire, Swift and WagonR. During the quarter, retail sales of passenger vehicles were impacted due to uncertain weather conditions, the inauspicious Shraddh period, and weak consumer demand. This resulted in a historically high inventory of 80–85 days with dealers, which weighed on passenger vehicle manufacturers' wholesale despatches.  

 

On a sequential basis, Maruti Suzuki is expected to report mid-single digit growth in percentage terms across key earnings parameters. Its net profit is projected to grow 4%, net sales 5%, and EBITDA 7%. Its EBITDA margin is seen expanding to 13% from 12.7% in Apr-Jun. This growth will be primarily driven by a 4% increase in wholesale volumes.

 

Maruti Suzuki is scheduled to report its earnings for the September quarter on Tuesday. At 1407 IST, the automaker's shares were at 11,984.10 rupees on the National Stock Exchange, up 0.5%. The company's stock had gained 6.3?ter its June quarter earnings announcement to a 52-week high of INR 13,680 on Aug. 1. The stock has since lost all its gains.

 

Following are the Jul-Sept earnings estimates of Maruti Suzuki, in INR million, from 12 brokerages:

 

Brokerage firm	Net sales	Net profit	EBITDA
Axis Securities Ltd	369,290	37,910	48,140
Centrum Broking Ltd	385,346	38,879	49,324
Elara Securities (India) Pvt Ltd	374,245	40,291	50,126
Kotak Institutional Equities	370,544	38,300	47,930
KR Choksey Research	373,888	38,444	50,785
Motilal Oswal Financial Services Ltd	372,402	36,976	45,911
Nirmal Bang Equities Pvt Ltd	369,565	38,472	48,043
Nomura Equity Research	367,282	37,418	46,504
Nuvama Wealth Management Ltd	368,647	36,332	44,962
Prabhudas Lilladher Pvt Ltd	377,558	38,702	48,705
Sharekhan Ltd	365,030	36,960	----
YES Securities (India) Ltd	372,033	38,439	47,776
Average	372,153	38,094	48,019

 

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Avishek Dutta

 

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