Apr 30, 2012, 06.20 PM IST | Source: Moneycontrol.com

Maruti Suzuki Q4 net profit falls 3%; what do analysts say?

Maruti Suzuki beat market expectations as fourth quarter net profit declined lower-than-expected 3% year-on-year to Rs 640 crore. However, the stock slipped over 2% on Monday morning as street didn't seem impressed over higher other income, a key reason for the earnings beat, and lower margins.

Moneycontrol Bureau

Maruti Suzuki beat market expectations as fourth quarter net profit declined lower-than-expected 3% year-on-year to Rs 640 crore. However, the stock slipped over 2% on Monday morning as street didn't seem impressed over higher other income, a key reason for the earnings beat, and lower margins.

The India's top passenger car maker's net sales for the three-month-period were up 17% year-on-year to Rs 11,486.4 crore.

Its EBITDA (earnings before interest, taxes, depreciation and amortization) margin was down 270bps year-on-year at 7.3% in Jan-March.

"A strong one-off other income and lower tax rate supported income, EBITDA margin was 214 bps below estimate at 7.3% due to higher raw material expenses, larger discounts offered to push petrol (car) sales, compensation to vendors who incurred forex losses and low volume," said Umesh Karne and Manashwi Banerjee of Brics Securities.

Sales of passenger cars for most of last fiscal were hit by slow demand due to expensive loans and high petrol prices. That apart, a crippling labour strike at Maruti Suzuki's Manesar plant partly in second and third quarters also hurt production of Maruti's popular Swift premium hatchback.

Sales, however, rebound 5% year-on-year in Jan-March as customers rushed to book their vehicles before the excise duty hike from April, and strong demand for the new Swift and compact DZire models.

For the full year (2011-12), Maruti Suzuki's total sales volumes declined near 11% from a year ago to 11,33,695 units.

Also Read: No great buoyancy in domestic market, says Maruti Suzuki

Most analysts say, the company could see better times ahead as recent new launches like the Ertiga MUV and ramp-up of diesel engine capacity will boost volumes.

"We believe that the next margin kicker will come from savings on gross margin front, in the form of stable input costs, favorable currency levels and further addition in realization levels due to rising proportion of diesel and high value models in the total portfolio," said Mohan Lal and Pooja Sharma of Elara Securities.

Maruti Suzuki has maintained its earlier guidance of around 10% sales growth in fiscal 2013.

Here are some more analysts' comments:

Antique Stock Broking: In our view, FY12 is a year best forgotten for Maruti. Going ahead, high volume growth should coincide with margin improvement (expect some help from currency/product mix). Directionally, the stock remains one of the best FY13-14 plays in the sector. Also, market share worries (a huge de-rating catalyst previously) have now faded. Rating: Buy. Target: Rs 1,716.

Citigroup: Given the recovery in volumes (in Q4) after a brutal third quarter, we increase our FY13, FY14 volume estimates by 6 %, 5% respectively. Our upward revision of FY13-14 earnings by 16%, 8% reflects volume growth as well as higher margin expectations. For FY13, we factor in 30,000 volumes for the Ertiga, which accounts for 50% of the earnings increase in FY13. Rating: Buy. Target: Raised to Rs 1,654 from Rs 1,585.

Edelweiss: Sales performance in Q4 has been stronger than our expectations. Not only response to the new DZire and Ertiga has been very strong, but also Alto performance has positively surprised with monthly sales rebounding to over 30,000. Moreover, lagged impact of lowering of interest rates and production of own diesel (engine) plant is likely to accelerate sales in FY14. Rating: Buy. Target: Rs 1,530.

IIFL: We are largely maintaining our FY13, FY14 EPS estimates with a slight cut in margins (due to adverse currency), offset by higher revenue and other income. Rating: Buy. Target: Rs 1,520.

Kotak Securities: Increased availability of diesel engines, strong response to new launches and low last year base will drive volume growth for the company. Further, favorable foreign exchange movement has given the company an opportunity to hedge portion of its FY13 forex exposure.  Rating: Accumulate.

At 11:30 hrs, Maruti shares were down 2% at Rs 1,370 on NSE.

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