Maruti Suzuki India Limited: In 2014, shareholders forced India’s biggest carmaker to backtrack on a production deal with its parent wherein it would buy cars from a new Suzuki plant in India instead of making them itself.
The bellwether of the Indian automobile industry, Maruti Suzuki India Ltd (MSIL) is to announce its second quarter results today amid a tough environment impacting input costs. Though experts expect revenue to be marginally higher on an annualised basis due to several price hikes implemented by the company, volumes are expected to decline due to the COVID-induced global chip shortage that has hit production.
Experts are of the opinion that this quarter is going to be tough on almost all automakers, reeling as they are from the pressure of elevated commodity prices, the necessity of bumper-to-bumper insurance and the semiconductor shortage.
A Sharekhan report says, “Revenue is expected to grow by 3.9% year-on-year (y-o-y) at Rs. 19,475 crore, driven by an 8% increase in average realization and a 4% decline in volumes. Average realization is expected to be higher due to price hikes taken by the company over the last one year, while volumes declined due to chips shortage.”
Kotak Institutional Equities follows similar lines and “expect revenues to increase by 3.6% y-o-y led by 8% y-o-y increase in average selling price (ASP) due to price hikes taken over the past few quarters and 4% y-o-y decline in volumes due to chip-shortage issue”. It expects MSIL to register revenues at Rs 19,412 crore.
Motilal Oswal expects volumes to decline by 3.5% y-o-y to 379,500 units and ASPs to rise by 6.7% to Rs 5,08,827 per unit from Rs 4,76,802 a unit a year ago and sees revenues improving 3% on a y-o-y basis to Rs 19,312 crore.
Experts believe the product mix for MSIL to improve with a higher contribution from utility vehicles (UVs).
Motilal Oswal expects raw material costs as a percentage of sales to increase by 500 basis points (bps) this quarter compared to same quarter a year earlier. A 100 bps rise in staff costs will be offset by savings of 100 bps on a y-o-y basis in other costs.
It expects the earnings before interest, taxes, depreciation and amortisation (Ebitda) to fall 51% to Rs 946 crore from the Rs 1,934 crore reported last year and Ebitda margins expected to come down 540 bps from 10.3% last year to 4.9% in this quarter.
Kotak estimates a y-o-y decline of 45% in Ebitda to Rs 1,063 crore and expects Ebitda margins of 5.5%, a decline of 484 bps from last year.
Sharekhan analysts expect Ebitda to decline by 43.6% y-o-y with Ebitda margins expected to contract 472 bps y-o-y to 5.6%, led by the sharp rise in raw material costs. The decline in Ebitda margins will percolate to the profit after tax or PAT levels and experts expect a similar decline in PAT as has been witnessed in Ebitda.
Kotak expects a PAT of Rs 774 crore, down 43.5% from last year, and net margins of 4%, down 330 bps from last year.
Motilal Oswal expects PAT to decline 45.2% from last year to Rs 751 crore, giving a net margin of 3.9%, which is 340 bps lower than last year.
Sharekhan says, “MSIL’s profits to be lower by 43.5% y-o-y due to production cuts and negative operating leverage, led by chips shortage.” It expects a net margin of 4%.
The stock closed at 7,297.35 on Tuesday, up Rs 36.75 (0.5%) from its previous day’s close. It has been more or less flat during the past one year, appreciating only 3%. It has generated negative returns of 4.5% this year and appreciated 5% in the last one month.