What you can expect from Maruti Suzuki Q3 earnings

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What you can expect from Maruti Suzuki Q3 earnings

India's largest passenger car maker Maruti Suzuki's third quarter results are expected to take a double blow from the slowdown in domestic sales and workers' strike at its Manesar plant. The New Delhi-based company will report earnings on Monday.

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Moneycontrol Bureau

India's largest passenger car maker Maruti Suzuki 's third quarter results are expected to take a double blow from the slowdown in domestic sales and workers' strike at its Manesar plant. The New Delhi-based company will report earnings on Monday.

After accelerating over 30% in 2010-11, passenger car sales have hit speed bumps this year, slipping 2.3% so far this fiscal, due to expensive loans and high fuel prices. Society of Indian Automobile Manufacturers has cut its car sales growth forecast for the industry to just 0-2% for the current fiscal.

Apart from the slowdown, Maruti was also hit by repeated labour unrests at its assembly plant in Manesar. The strike here and at its associate Suzuki Powertrain, which supplies diesel engines, sent production schedule for one of its most selling hatchback Swift for a toss.

"Volumes declined 27% as the company combated a labour unrest and sluggish demand environment. (We expect) profit after tax on a year-on-year basis to halve to Rs 2.7 billion (Rs 270 crore)," said Vineet Hetamasaria and Nikhil Deshpande of Pinc Research.

Motilal Oswal's Jinesh Gandhi and Mansi Varma expect Maruti Suzuki's profit will plunge 73% year-on-year, while net revenue will decline 22%.

Analysts expect EBITDA margin will also contract 350-450 basis points from a year ago due to the depreciation in rupee.

Key things to watch out for:

- Sales volumes and outlook for the fourth quarter and fiscal 2013.
- Any commentary on foreign exchange hedges.
- Update on diesel capacity ramp up. Demand for diesel cars has surged this year due to a sharp rise in petrol prices.
- New product launches. The company is slated to launch the multi-utility vehicle Ertiga and the new compact Swift Dzire in 2012, which some analysts say will boost sales. 

Maruti Suzuki shares closed down 2.3% at Rs 1,103.50 on NSE on Friday. The stock is up 0.8% in the last three months, compared to the broader Nifty, which is flat over the same period.

Motilal Oswal has a "buy" rating on Maruti Suzuki, Angel Broking and Pinc Research have an "accumulate" rating, while Emkay recommends a "reduce."