Maruti Suzuki Q2 net profit may surge at 358% on cheaper raw materials

Maruti Suzuki Grand Vitara | Maruti Suzuki recently unveiled their new flagship SUV called the Grand Vitara. Launched just last month on September 26, the Grand Vitara has a starting price of Rs 10.45 lakh and goes head to head with the likes of the Toyota Urban Cruiser Hyryder (which also launched shortly before the Grand Vitara), Kia Seltos, Hyundai Creta and more. (Image: Maruti Suzuki)

Maruti Suzuki may post a whopping 358 percent surge in net profit for the September quarter, with raw material prices softening, Japanese yen losing the sheen, and operating leverage working in favour.

Analysts expect the auto major to see net profit rise anywhere between 343 percent and 358 percent year-on-year (YoY), with revenue going up between 41 percent and 46 percent over the same period. EBITDA margin is forecast to rise by 537 bps to 654 bps.

They expect the net profit to rise between 108 percent and 115 percent on-quarter with revenue increasing between 9 percent and 13 percent over the same period. Quarter on quarter, EBITDA margin is forecast to rise by 232 bps to 348 bps.

The company will declare its financial results for the quarter ended September 2022 on October 28.

Sequential Performance

Kotak Institutional Equities (KIE), in its sectoral preview report, said that it expected the company’s EBITDA (or operating profit) to improve by 340 bps on-quarter led by reasons such as the benefit of a depreciating yen against the rupee. The analysts noted that 7 percent of the direct and indirect raw-material imports for the company are yen-denominated. But, they added, these margin tailwinds — of operating leverage benefits, currency depreciation and falling raw material costs — will be partly offset by higher marketing spends on new product launches in this second quarter.

IIFL’s analysts have said that they expect the company’s EBITDA margin to improve sharply QoQ by 232 bps. Among the margin tailwinds, the analysts listed fall in commodity prices, yen depreciation and operating leverage. They expect the margin to rise by 537 bps YoY.

Divided House

Analysts are divided on realisation from sales volumes. Analysts at Sharekhan and KIE state that sales realisation is set to increase quarter-on-quarter with better product mix. The KIE report stated that they expect revenue to increase 12 percent on-quarter, driven by 11 percent QoQ increase in volumes and 1 percent QoQ increase in ASP (average selling price) due to a “richer product mix” in the quarter ending September. But Axis Securities analysts have said that they expect revenue growth to be “partially offset by lower sales realisation due to higher sale of entry level products in the mix and marginally lower exports”.

A large majority of the sales volume for the quarter — around 88 percent — is indeed coming from domestic sales. Exports form only the remaining 12 percent of the sales.