Maruti Suzuki Q2 preview: Net profit may rise 42% on benign commodity costs, product mix

Easing raw material costs should provide support to sustain the gross margin expansion trend during the quarter.

Maruti Suzuki, India's largest OEM manufacturer, is expected to report a 42 percent increase in net profit in the quarter ended September on the back of a favourable product mix, price hikes undertaken by the company, and softening commodity prices. The company is slated to announce its results on October 27.

As per the average estimates of five brokerage firms, Maruti is poised to post a net profit of Rs 2,921 crore in the second quarter as against the Rs 2,061 crore recorded during the same period last year.

At 2:30 pm, Maruti was trading at Rs 10,449, down 1.3 percent from the previous close on the NSE.

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The company's revenue from operations is expected to increase to Rs 35,218 crore, marking an increase of over 23 percent from the year-ago period. During the same quarter last year, Maruti's revenue stood at Rs 28,543 crore.

The company's EBITDA margin is expected to be about 11.1 percent, up more than 180 basis points year-on-year, largely benefitting from operating leverage, favourable mix and easing commodity prices.

Also read: Maruti Suzuki receives Rs 2,160 crore draft income tax assessment order

Domestic broking firm Prabhudas Lilladher states that the SUV space is yielding success, and an industry leading volume growth could help regain some of the market share losses. It also added that the company has been preparing in the background and will launch its first EV model in FY25.

Read more: Grand Vitara SUV likely to be Maruti Suzuki’s first model to be equipped with ADAS

Analysts at InCred Equities are of the view that benign commodity costs on a quarter-on-quarter basis should provide support to sustain the gross margin expansion trend as precious metals have recorded a sharp fall. The trend in the Japanese yen is said to benefit Maruti Suzuki’s imports, while exports benefit from the US dollar's strengthening also bodes well for the company.

"Due to better availability of electronic components, Maruti could manage to sell a higher number of sports utility vehicles, which will lead to an improvement in the mix", analysts at KRChoksey said in a report. Over the course of months, the company has added Invicto, Jimny, Fronx, and Grand Vitara to their SUV portfolio. "The company has a strong marketing reach and distribution network", Axis Securities said in a note.

In the quarter, analysts suggest that the company's UV mix is expected to grow to 33 percent, up by 25 percent quarter-on-quarter.

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