{"id":166568,"date":"2022-11-07T09:37:18","date_gmt":"2022-11-07T09:37:18","guid":{"rendered":"https:\/\/precoinnews.com\/?p=166568"},"modified":"2022-11-07T09:37:18","modified_gmt":"2022-11-07T09:37:18","slug":"maruti-suzukis-q2-result-could-impact-auto-sector-stocks-positively","status":"publish","type":"post","link":"https:\/\/precoinnews.com\/business\/maruti-suzukis-q2-result-could-impact-auto-sector-stocks-positively\/","title":{"rendered":"Maruti Suzuki’s Q2 result could impact auto sector stocks positively"},"content":{"rendered":"
Maruti’s results and the investor response indicate that quite a few stocks in the auto sector could be on the verge of a big bounce, says Devangshu Datta.<\/strong><\/p>\n <\/p>\n A jump in profits allied to optimism on the supply chain led to a bounce in the share price of Maruti Suzuki.<\/p>\n The company said it sold a record 517,395 vehicles in Q2, 2022-23: domestic sales stood at 454,200, while exports accounted for 63,195 units.<\/p>\n The firm had sold 379,541 units in Q2, 2021-22, when production was constrained by chip shortages.<\/p>\n In addition, the company claimed it had pending orders for 412,000 vehicles.<\/p>\n Maruti’s consolidated revenue came in at Rs 29,943 crore, as against Rs 20,551 crore in the year-ago quarter.<\/p>\n The Ebitda (earnings before interest, taxes, depreciation, and amortisation) stood at Rs 3,433 crore, as against Rs 1,389 crore in the same period last year.<\/p>\n The firm’s operating profit had dipped last year due to chip shortages and high commodity prices.<\/p>\n Efforts at sourcing electronic components, cost-reduction measures, and improving realisations led to much better margins.<\/p>\n The standalone Ebitda margin rose to 7.2 per cent from just 0.5 per cent, while consolidated PAT (profit after tax) jumped to Rs 2,113 crore from Rs 487 crore a year ago.<\/p>\n While the firm’s top line was 1.4 per cent ahead of Bloomberg consensus estimate, its net profit was 4.3 per cent ahead of projections.<\/p>\n <\/p>\n Even in sequential comparisons, the company’s performance improved considerably over Q1, 2022-23.<\/p>\n In Q1, Maruti’s consolidated revenue amounted to Rs 26,512 crore, with Ebitda of Rs 2,027 crore and net profit of Rs 1,036 crore.<\/p>\n The standalone Ebitda margin improved 220 basis points sequentially in Q2.<\/p>\n Another favourable factor has been the rupee’s strengthening versus the yen, which reduced the cost of imports and other payouts to the parent.<\/p>\n However, while raw material costs have dropped and the disruption of supply of electronic components has also reduced, power costs have risen and so have advertising and marketing expenses.<\/p>\n There’s been volume growth in every segment except for mid-size and LCV.<\/p>\n Mini+ compact sales volume was up 57 per cent YoY and van sales were up 32 per cent, while UV sales were up 10 per cent. Of course, there was a low-base effect but even so, the growth is impressive.<\/p>\n <\/p>\n Overall, sales across the passenger vehicles segment, where Maruti is by far the largest player, have improved for most companies, with aggregated volumes growing by 15 per cent quarter-on-quarter (QoQ).<\/p>\n Chip supply normalisation has been noted for other auto manufacturers as well and raw material costs have fallen.<\/p>\n The festival season is crucial — analysts will be monitoring rural demand through this period. One bad signal is poor growth in the tractor segment.<\/p>\n However, Maruti’s huge order book ensures that it is very likely to have another record\/near record quarter in Q3.<\/p>\n At the sector level, Maruti has lost market share — now it has around 41 per cent compared with over 50 per cent pre-pandemic.<\/p>\n At the macro level, concerns about global inflation and rising interest rates remain.<\/p>\n This is an inherently capital-intensive industry and there are always working capital needs even in a scenario of high demand and smart inventory management.<\/p>\n Maruti’s results and the investor response indicate that quite a few stocks in the auto sector could be on the verge of a big bounce.<\/p>\n On the NSE, the stock jumped 5.6 per cent on the results, and it’s up 8.8 per cent in the last month and 19.5 per cent in the last year.<\/p>\n Feature Presentation: Rajesh Alva\/Rediff.com<\/em><\/strong><\/p>\n