Maruti Suzuki slips 3% on disappointing June quarter results

Shares of Maruti Suzuki India (MSIL) dipped nearly 3 per cent to Rs 6,965 on the BSE in intra-day trade on Thursday, down 4 per cent in past two trading days, after the car and utility vehicles company reported disappointing numbers for the quarter ended June 2021 (Q1FY22).

The company’s total operating income declined 26 per cent quarter-on-quarter (QoQ) to Rs 17,771 crore in Q1FY22, due to a 28 per cent volume decline to 3.53 lakh units. Profit after tax (PAT) declined 62 per cent QoQ to Rs 441 crore. It had posted a loss of Rs 249 crore in the year-ago quarter. Ebitda (earnings before interest, taxes, depreciation, and amortization) margins declined by 367 basis points (bps) sequentially to 4.6 per cent.

The company said profit for Q1FY22 was primarily impacted due to lower sale volumes. The commodity prices increased steeply but the company continued to make efforts to reduce costs.

"The second wave of the pandemic adversely impacted Q1 production and sales. While all parameters this quarter were substantially better than Q1 of FY2020-21 (Q1FY21), a comparison is not meaningful because Q1 last year had a much higher degree of disruption due to the pandemic. Sales in Q1 remain far below the previous high in Q1 of FY2018-19 (Q1FY19)," the company said.

MSIL’s performance was below expectations on all counts, with margins impacted by increase in all cost heads – especially in case of employee costs, partly due to one-offs, brokerage ICICI Securities said in a note. "Profitability pressure was exacerbated by lower other income. For MSIL, utility vehicle (UV) product launch to address heightened competition is a key monitorable, although general sluggishness on the electric vehicle (EV) opportunity is a persistent disappointment," it added.

Another brokerage Motilal Oswal Financial Services said MSIL reported a weak performance in Q1FY22, weighed by the impact of the lockdowns on volumes as well as commodity cost inflation. While commodity inflation would persist in 2Q, there are drivers in place for sustained volume and margin recovery from 2HFY22E. We lower our FY22E/FY23E EPS by 13 per cent/3 per cent, factoring in further cost inflation in Q2, higher staff costs, and lower other income, it said.

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