Maruti to see double digit margins in few quarters: Quant

In an interview to CNBC-TV18 Basu Banerjee of Quant Broking analysed the third quarter performance of country's largest car manufacturer Maruti Suzuki.

The company’s net profit rose 2.4 times year-on-year basis higher-than-expected - to Rs 501 crore in the third quarter of financial year 2012-13. Shares of Maruti Suzuki shot to a three-year high of Rs 1,601 on this announcement. Net sales too came in better-than-forecast, rising nearly 45 percent to Rs 11,200 crore from Rs 7,882.4 crore during the same period. The movement of Yen, rise in production of diesel cars and Suzuki Powertrain merger would be key triggers for the company going ahead. "The impact of Yen movement should come from Q4 onwards. Full fledged production of diesel units from Maruti is increasing next year. The merger of Suzuki Powertrain, which will be margin accretive," he elaborated. Below is the edited transcript of Basu Banerjee's interview with CNBC-TV18 Q: What is your first take to the numbers that you have heard so far Rs 890 crore in terms of Earnings before interest, tax, depreciation, and amortisation (EBITDA) profit of 500 and about Rs 11000 crore in terms of sales? A: Though margins surprised street estimates positively, but it could have been tad better than 8 percent, which I expect should trickle-in in Q4. They are broadly satisfying set of numbers. If one looks at their net realization, it improved around 3.5 percent quarter on quarter primarily led by better mix. Ertiga and Dzire volumes improved significantly. Q: What is the next trigger you are watching out for? A: I see three triggers for Maruti going ahead. One is the Yen, it is current at 90.5. So, the main impact of that should come from Q4 onwards. Secondly, full fledged production of diesel units from Maruti is increasing next year and also Q4 is generally a decent quarter. Third is the merger of Suzuki Powertrain, which will be margin accretive. So the movement in Yen coupled with Suzuki Powertrain can lead to double digit margins for the company two to three quarters away from now.