Maruti Suzuki Q2 preview: Profit, EBITDA may decline 60% YoY on lower volumes


The country’s largest car manufacturer Maruti Suzuki India is likely to report around 60 percent year-on-year decline in its September quarter profit, dented by lower volumes amid weak demand. The lower tax rate could limit the fall in its bottomline.

The stock has recovered 27 percent in the last couple of months on hopes of a demand improvement after the government announced several measures. Year-to-date, the stock is down just 0.3 percent.

Revenue from operations during Q2 FY20 may decline 23-27 percent on the back of 30 percent fall in volumes YoY. A likely increase in realisation may support the topline. “We expect revenue in Q2 to decline 24 percent on the back of a 30 percent YoY decline in volumes,” Kotak Institutional Equities said.

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Motilal Oswal expects net realisation to increase five percent YoY (down two percent quarter-on-quarter) to Rs 4,82,000 per unit, resulting in net revenue decline of around 27 percent YoY (down 17 percent QoQ).

At the operating level, earnings before interest, tax, depreciation and amortisation (EBITDA) is also likely to drop around 60 percent and margin contract around 700 bps compared to the year-ago quarter, dented by higher discounts to boost demand and negative operating leverage. High fixed cost at its Gujarat plant due to low volumes may also impact margin.

“We expect margin to contract 740bps YoY (down 330 bps QoQ) to 10.2 percent due to higher discounts and operating deleverage. EBITDA is estimated to decline 64 percent YoY (down 43 percent QoQ),” said Motilal Oswal, which has maintained its buy call on the stock.

Key things to watch out for would be update on the demand scenario and trend in urban and rural areas; channel inventory; discounting trends and new launches.

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