Maruti expected to report subdued first quarter earnings on the back of double digit fall in sales

Maruti Suzuki - country’s largest passenger vehicle manufacturer - is expected to report subdued growth revenue and net profit in the first quarter of the current financial year as sales across segments declined by double digits.

The New Delhi based vehicle manufacturer will continue to see decline in revenue due to the high base in the corresponding period and 19% fall in sales in the April to June quarter.

At an operating level as well higher input cost and double digit production cut down throughout the quarter will continue to hurt the company’s operating profit and significant contraction in operating profit is also on the cards.

As result of the prolonged slowdown in the sales of automobiles, Maruti Suzuki decided to reduce production by double digits in the last five consecutive months which will have an adverse impact on the financials of the company.

“EBITDA margin for our original equipment manufacture (ex-JLR) universe is likely to contract for the fourth consecutive quarter by 310bp YoY (-70bp QoQ) to 10.7% due to higher variable marketing expenses and negative operating leverage. While almost all OEMs (except TVSL and TTMT S/A) are likely to see year in year margin contraction, MM and TVSL are expected to deliver a QoQ margin recovery of 80bp and 20bp respectively," said analysts of Motilal Oswal in a report.

Maruti Suzuki though announced a price increase of its products across categories during the quarter, due to rise in input costs and introduction of new safety norms.

Sales of passenger vehicles in the April to June quarter of the current financial year declined by 18.4%, sharpest since the third quarter of FY 2000-2001.

Maruti Suzuki India Limited