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Maruti Suzuki Q1 Preview | Profit may see sequential decline on weak revenue, operating performance

But on YoY basis, the auto maker would register growth of over 250 percent, on low base effect brought about by the second wave of COVID-19.

July 26, 2022 / 04:46 PM IST
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Maruti Suzuki India Ltd, the country's largest car maker, is expected to report 5-12 percent sequential fall in profit for the quarter ended June 2022 on lower revenue and operating income, but on-year basis, the growth would be more than 250 percent due to low base. The June 2021 quarter was affected by the emergence of the second wave of COVID-19, which forced several states to announce lockdowns.

The Nifty Auto index is at a new high, but Maruti Suzuki is yet to achieve that milestone. The Maruti Suzuki stock has gained nearly 13 percent in the current financial year, compared to a 16 percent rally in the Nifty Auto index. The stock witnessed selling pressure in the last two days, ahead of quarterly earnings which will be announced on July 27.

Revenue is likely to fall in the range of 1-3 percent sequentially for the quarter supported by price hikes taken by the company and impacted by lower volumes, but the year-on-year (YoY) growth could be more than 45 percent, as per brokerage houses.

Maruti Suzuki sold more than 4.67 lakh vehicles in the quarter ended June 2022, registering a 4.3 percent sequential decline, but 32.3 percent YoY increase.

Also readBajaj Auto Q1 result | Profit rises 10.6% to Rs 1,173 crore, beats estimates all earnings parameters

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"We expect revenues to decline by 3 percent QoQ led by 4 percent QoQ decline in volumes, and 1.5 percent QoQ increase in average selling price (ASPs) due to price hikes taken over the last quarter in Q1FY23," said Kotak Institutional Equities, which sees 265 percent YoY growth and 12.5 percent sequential decline in adjusted profit.

ICICI Direct feels Maruti Suzuki would report a steady performance in Q1FY23, with revenue falling 2.6 percent QoQ amid 4.3 percent QoQ de-growth in volumes and sequential rise in ASPs.

The operating profit is likely to decline QoQ on account of higher input cost and higher marketing spends, though there was support from price hikes and yen depreciation against the Indian rupee.

Also readAsian Paints Q1 results | Profit up 80% YoY at Rs 1,036 crore on low base

"We estimate EBITDA margin to decline by 50 bps QoQ led by raw material headwinds and higher marketing spends due to new product launches, which was partly offset by price hikes taken during the quarter and benefit of Yen depreciation against of INR, resulting in lower cost of raw material imports (7 percent of the direct and indirect raw material imports are Yen denominated) in Q1FY23," said Kotak, which sees EBITDA falling 8.2 percent QoQ and increasing 172 percent YoY.

"Gross margin is expected to contract due to higher input costs. EBITDA margin may decline (40 bps QoQ) due to adverse scale and lower gross margin," said Emkay Research, which sees 5.7 percent QoQ decline in earnings before interest, tax, depreciation and amortisation (EBITDA.)

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Sunil Shankar Matkar
first published: Jul 26, 2022 04:46 pm
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