Quick Take | Maruti Suzuki: Subdued demand, cost increase mar Q3 earnings

The Toyota 'Belta' will be a rebadged Maruti Suzuki Ciaz

Nitin Agrawal Moneycontrol Research

Maruti Suzuki India (MSIL), leader in the Indian passenger vehicle market, posted a weak set of Q3 FY19 earnings. MSIL posted a 0.6 percent year-on-year (YoY) decline in volume, due to subdued demand on lower festive sales, mandatory long-term insurance, rising interest rates and non-availability of retail financing.

Average selling price, however, saw a 2.6 percent improvement on the back of rich product mix, despite discounts offered on weak sales and higher level of inventory. This led to a two percent YoY growth in its net revenue from operations.

The auto major posted a 36.4 percent decline in earnings before interest, tax, depreciation and amortisation (EBITDA) on the back of a decline in volumes and significant rise in raw material and other expenses. These factors also led to EBITDA margin contraction of 593.5 bps (100 basis points = 1 percentage point).

The subdued near-term outlook limits stock upside, although we have a positive long-term view on the stock.

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