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Maruti Suzuki Q3 Result Preview: Net Profit Likely To Rise Over 20%, Revenue May Rise Double

Maruti Suzuki anticipates Q3 profit growth despite concerns over declining margins.

India’s leading car manufacturer, Maruti Suzuki, is gearing up to announce its financial results for the third quarter ending December 31, 2023, on January 31. However, anticipation is tempered with caution as analysts predict a potential decline in margins, attributed to an unfavorable product mix and increased discounts offered during the festive December quarter.

Analysts from various brokerages estimate a 21% year-on-year growth in profit for the October-to-December quarter, reaching an impressive ₹2,838 crore. Despite this anticipated growth, concerns loom over the sequential decline in margins, with expectations that EBITDA margins may contract by 150 basis points quarter-on-quarter to 11.5%.

Kotak Institutional Equities weighed in on the projections, stating, “We expect revenues to increase by 14% YoY, led by an 8% YoY increase in volumes and a 6% YoY increase in ASPs due to price increases and a richer product mix (higher mix of SUV segment) in 3QFY24.” The firm emphasized the potential challenges, projecting a decline in EBITDA margins due to negative operating leverage benefit, higher festive season discounts, reversal of finished goods inventory, and an inferior product mix.

In the previous quarter ending September, Maruti Suzuki reported stellar financial performance with an 80% surge in net profit, reaching ₹3,716 crore, and a robust 24% growth in revenues, totaling ₹37,062 crore. However, the upcoming results may reveal a different story as analysts expect a contraction in EBITDA margins by 70 basis points quarter-on-quarter to 12.2%, driven by increased raw material costs and operating deleverage.

Motilal Oswal, another brokerage firm, noted, “Volume growth of 8% YoY was driven by visible traction in UVs (60% YoY growth), while entry-level models declined 48% YoY. EBITDA margin likely to contract 70bp QoQ to 12.2%, due to an uptick in RM costs coupled with operating deleverage. We have slightly tweaked our FY24E/FY25E volumes to account for the weakness in the entry-level segment.”

Despite these concerns, analysts at Nuvama Institutional Equities project a 13% year-on-year growth in Maruti Suzuki’s passenger vehicle segment. Comparatively, Mahindra and Mahindra (M&M) have surpassed industry standards, achieving an exceptional 26% year-on-year growth in passenger vehicle revenue for M&M’s auto division. A report highlights the positive impact of the Japanese yen’s depreciation against the Indian rupee on the company’s prospects.

As the automotive industry navigates dynamic market conditions, industry observers emphasize the importance of monitoring Maruti Suzuki’s demand outlook, particularly in rural and entry-level segments. Investors and industry enthusiasts alike will keenly watch the financial results announcement on January 31, seeking insights into the company’s performance and strategies to address evolving market challenges.

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