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Last Updated : Apr 25, 2019 08:17 AM IST | Source:

Q4 preview: Maruti Suzuki likely to report weak numbers on low volumes, competition

Brokerages expect profit to decline in the range of 10-22 percent YoY, but sequentially it may increase in double digits

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Maruti Suzuki, the biggest passenger vehicle maker in India, is likely to report a weak set of earnings for the March quarter, brokerages say. Low volume and competition will dent earnings for the quarter.

The company will announce its Q4 and annual earnings on April 25.

In the March quarter, the stock has fallen 8 percent affected by volatility and tepid volume growth. In fact, overall consumption growth slowed after the IL&FS-led liquidity crisis in September.

Brokerages expect profit to decline in the range of 10-22 percent YoY, but sequentially it may increase in double digits.

"In Q4FY19, Maruti is expected to report better numbers sequentially due to absence of any one-offs. The numbers, however, will still be down YoY primarily tracking de-growth in volumes amid increasing competitive intensity in the marketplace," said ICICI Securities which expects profit to fall 16 percent YoY.

Revenue growth is expected to be tepid on lower volume growth YoY, but sequentially the same may see 5-10 percent growth.

"We expect revenues to remain flattish YoY (8 percent QoQ) in Q4FY19 on the back of 1 percent YoY volume decline, which will be offset by 1 percent YoY increase in ASPs due to a better product mix," said Kotak that expects 24 percent growth in profit QoQ.

Total dispatches in Q4 were at 4.6 lakh units, down 0.7 percent YoY and up 7 percent QoQ.

"Revenue is expected to grow 1.3 percent YoY in Q4FY19 due to decline in volumes and 2 percent YoY growth in realisation. There is a slowdown in demand in passenger vehicle segment across various geographies both in rural as well as urban areas and it is expected to remain flat in the first half of FY20 as well," Narnolia said.

Prabhudas Lilladher expects realisations to inch up around 1 percent YoY and 2 percent QoQ on account of better product mix with a higher share of new launches (Ertiga/WagonR).

At operating level, higher discounts and industry-wide slowdown may take a toll on margins, despite better product-mix; but sequential growth is expected to remain strong, brokerages said.

"EBITDA margins are expected at 12 percent, down 220 bps YoY but up 220 bps QoQ primarily factoring in a marginal decline in raw material costs. Consequent net sales in Q4FY19 is expected at decline 1.3 percent YoY," ICICI Securities said.

With discounts being lower QoQ (higher YoY) and slight QoQ commodity relief, Prabhudas Lilladher also expects margins to be at around 12 percent, up 220bps QoQ but lower down 220bps YoY.

"We expect EBITDA to decline 9 percent YoY in Q4FY19 led by (1) rise in commodity costs and (2) increase in discounts due to a weak demand scenario. We expect EBITDA margin to improve 300 bps QoQ led by (1) 140 bps improvement in gross margin and (2) 150 bps improvement due to lower staff cost and discounts," Kotak said.

Key issues to watch out for

- update on demand scenario

- channel inventory

- discounting trends and new launches

- demand trend in urban and rural areas

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First Published on Apr 25, 2019 08:17 am
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