BackMaruti Suzuki Q1 profit rises 56.5% on weaker yen, higher sales
Net sales grow 18.1% to Rs13,078.3 crore from a year earlier; 341,329 cars sold in the quarter, an increase of 13.8%
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New Delhi: Maruti Suzuki India Ltd on Tuesday said fiscal first-quarter profit rose 56.5% on higher sales and lower input costs.
Net profit rose to ₹ 1,193 crore in the quarter ended 30 June from ₹ 762 crore in the year earlier. However, the performance missed analysts’ estimates by a wide margin. A Bloomberg poll of 37 analysts had expected Maruti’s June quarter profit at ₹ 1,270 crore. In the preceding March quarter, Maruti Suzuki had recorded ₹ 1,284 crore profit, its highest ever.
Net sales grew 18.1% to ₹ 13,078.3 crore from a year earlier, the company said on Monday. The Indian unit of Japan’s Suzuki Motor Corp. sold 341,329 cars in the June quarter, an increase of 13.8% from the year-ago period.
Maruti’s performance was boosted by higher demand for cars, cost-reduction measures, low expense on sales promotion and a weaker yen that made imports of car parts cheaper, the company said.
Maruti’s performance did not match expectations of Ravi Shenoy, vice-president (mid-caps research), Motilal Oswal Securities Ltd.
“Numbers would have been higher but for lower other income at ₹ 170 crore (down 28%) and a higher tax outgo," Shenoy said. He expected Maruti’s net profit at ₹ 1,350 crore.
According to him, factors that supported the strong profit growth also include a 3.7% higher realization per vehicle and favourable foreign exchange movement.
Bharat Gianani, an analyst with Angel Broking Pvt. Ltd, said Maruti’s results were in line with his estimates.
“Realization per vehicle grew 4% y-o-y (year-on-year) on the back of a better product mix. Operating margins improved 420 basis points y-o-y to 16.3% due to reduction in raw material costs owing to Japanese yen depreciation and reduction in discounts," Gianani said.
A basis point is one-hundredth of a percentage point.
The yen’s weakening also helped Maruti save money on royalty, which it pays to its parent every quarter.
During the April-June quarter, the yen lost 1.93% and 0.13% against the dollar and the rupee, respectively.
Maruti cancelled an earnings call with analysts in the evening.
Investors are bullish on Maruti’s stock. Out of 60 brokerages tracking the stock, as many as 53 had a buy rating, while six recommended hold and only one said to sell.
Shenoy said Maruti’s new product launches are targeted towards filling gaps in its product portfolio, and would improve the product mix.
The company will introduce its first crossover, the S-Cross, in the Indian market on 5 August, which will be sold under a separate sales network, which is a part of a strategy to tap customers who have driven Maruti for a while now and are now switching to Japanese or European car brands. These spruced-up showrooms will differ from existing dealerships in design and service.
Apart from the S-Cross, Maruti will sell the Ciaz and a premium hatchback code-named YRA at its brand-new Nexa dealerships.
The company has said it looks to grow its sales in the range of 11-12% during 2015-16, which is a notch above the overall passenger vehicle industry’s expectation to grow in the range of 6-8%.
A forecast of a below-normal monsoon for a second year was expected to hurt farm output and increase distress in rural areas, crimping demand for automobiles.
But, the monsoon rainfall deficit continues to shrink even as the India Meteorological Department forecast more rainfall in various parts of the country on Wednesday and warned of heavy rainfall in some regions.
This is likely to help Maruti during the year as it is strengthening its presence in rural areas and aims to expand sales to 25,000 additional villages during the current fiscal year.
Maruti’s June-quarter Ebitda (earnings before interest, taxes, depreciation and amortization) margin widened 420 basis points to 16.3%.
Maruti’s shares have risen more than 25% since January—the highest among major automobile companies in India.
On Wednesday, the shares gained 0.46% to ₹ 4,195.65, while the benchmark Sensex declined 0.37% to 27,459.23 points.
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