Maruti Suzuki Q3 Preview: Numbers likely to be strong YoY, FY23 outlook crucial

Maruti Suzuki India, which will detail earnings on Tuesday, is expected to report strong year-on-year growth for the December quarter on the back of higher sales, better product mix, and higher realisations.

However, the numbers are likely to drop on a sequential basis due to lower sales volume and higher expenses incurred on account of advertising and promotion. According to an ET Now poll, the revenue is likely to increase 17% YoY to Rs 27,162 crore, but drop by over 9% sequentially. Net profit is expected to increase sharply by over 85% YoY to Rs 1,873 crore, but fall over 32% sequentially. Realisation is expected to increase 6.6% on year, but remain flat sequentially.

Operating margin is expected to expand to 9.7% in the quarter, and if the reported number is above 9.5%, it would be the first time in 2 years that the country’s largest automaker will see profitability surpassing that figure.

While keeping an eye on the December performance, Dalal Street will eye the company’s outlook for sales in the ensuing months, and if it will stick to the guidance of 2 million units sales for FY23.

Strong recovery in passenger vehicle sales have aided four-wheeler makers and even boosted their stocks. Maruti Suzuki shares in 2022 outperformed Nifty50, as they gained 13%.

Here’s a summary of brokerage expectations on the third quarter earnings:

Sharekhan
Revenue is expected to grow 17.3% YoY to Rs 27,268 crore, led by an 8.2% increase in volumes and 8% increase in average realisation. The average realisation is expected to improve on the back of the product mix.

Operating leverage benefits, softening of raw material prices and Yen depericiation against rupee, will be partially offset by marketing expenses on new launches and increased discounts on vehicles. Net profit is expected to increase by 91.4% YoY and decline 6% QoQ to Rs 1,935 crore.

Kotak Institutional Equities
The brokerage expects revenue to decline by 9% QoQ, on the back of a 10% sequential decline in volumes and a 1% increase in advertising and promotional spend due to a richer product mix, partly offset by higher discounts in Q3.

The brokerage estimates EBITDA margin to increase by 60 bps QoQ, led by softer raw material prices and benefit of the depreciation of yen against the rupee. This would help lower the cost of raw material imports (7% of the direct and indirect raw material imports are Yen-denominated).

Motilal Oswal Securities
The easing of supply chain constraints combined with traction for new model launches will aid the volume growth for the automaker. Operating margin is likely to expand 290 bps YoY and 30 bps QoQ to 9.6%, led by the benefits due to lower raw material cost and better mix.

Emkay Global Financial Services
The brokerage expects revenue to grow YoY due to higher volumes (+8%) and realisation (+13%). Realization will improve due to better model mix and price hikes.

Gross margin is likely to expand due to price hikes, commodity deflation and depreciation of the yen against the dollar. EBITDA margin is likely to expand owing to benign scale and better gross margin.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)