Maruti Suzuki dips 7% in two days post Q3 results on margin concerns

Shares of (MSIL) fell 3.3 per cent to Rs 7,335 in intra-day trade on the BSE on Friday, tumbling 7 per cent in the past two trading days after Ebitda (earnings before interest, taxes, depreciation, and amortisation) contracted by 70 basis points (bps) to 9.5 per cent in the December quarter (Q3FY21), due to higher-than-expected raw material, employee and marketing expenses.

The stock was trading lower for the sixth session, falling 10 per cent during this period.

MSIL said the company’s operating profit during the quarter grew 19.3 per cent year on year (YoY) at Rs 1,485 crore on account of higher sales volume and cost reduction efforts partially offset by increase in commodity prices and adverse foreign exchange movement.

The company registered 13.2 per cent YoY growth in net sales at Rs 22,237 crore. The net profit for the quarter stood at Rs 1,941 crore, higher by 24.1 per cent YoY owing to the above factors and higher non-operating income, it said.

“The strong demand has resulted in the large pending order book of 215,000 units. Led by better macros, healthy order-book and network re-stocking, wholesales are likely to reach a new peak of 1.88mn units in FY22E and continue uptrend to 2.04mn units in FY23E. MSIL should hold the pole position with around 50 per cent market share, owing to a wide product portfolio, continuing network expansion and focus on new products. Over the next 2 years, new models could include Jimny UV, EV hatchback, over-4m UV, Baleno crossover, etc,” analysts at Emkay Global Financial Services said in result update.

OPM contracted 83 bps sequentially due to higher commodity prices, salary increments to employees and increase in marketing spends. To minimize the impact, MSIL announced price increases in January 2021 and is working on cost reduction initiatives, the brokerage firm said.

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