Analysts at Prabhudas Liladher expect the inventory correction and production cuts during 2QFY20 as reflected in sharp decline in volumes across segments to continue to dent Maruti's financial performance. Maruti's volumes declined 30 per cent year-on-year (down around 16 per cent QoQ) to 3.4 lakh units during the quarter.
They expect Maruti to post a revenue decline of 24 per cent on a year-on-year basis at Rs 16,820 crore despite an expected increase in realization to 8 per cent YoY. In comparison, the company had reported Rs 22,233 crore as revenue in the year-ago quarter. Net profit may also halve to Rs 1,100 crore against the Rs 2,040 crore it posted in the same quarter last year.
"We believe the decline in raw material prices to be offset by unfavourable currency movement and negative operating leverage. Hence margins are expected to be at 10 per cent, down 40 basis points sequentially. Earnings before interest, taxation, depreciation, and amortisation (Ebitda) is seen at Rs 1,677 crore, down 48 per cent YoY from Rs 3,231 crore in the year-ago quarter," the brokerage said.
The brokerage expects a poor quarter for Maruti, in line with the subdued mood in the entire auto sector. The brokerage expects the big volume drop will pull down revenue by 23 per cent YoY to Rs 16,944 crore while net profit may dip 48 per cent YoY to Rs 1,166 crore.
"Sales drops lag the volume decline on account of lower ASP segment (mini & compact) having contracted to a greater degree than UV portfolio. Maruti is expected to have realised input cost benefits. However, a sharp volume drop is seen impacting operating leverage negatively, thus dragging EBITDA margins by 40 bps QoQ to 10 per cent," analysts said.