Strong sales steer Maruti profit up 10% in Q4 to ₹1,882 crore
Maruti Suzuki India Ltd, the country’s largest carmaker by volume, reported a 10% year-on-year jump in net profit to ₹1,882.1 crore for the quarter ending 31 March, on the back of increased demand from rural and semi-urban markets, improved product mix and realizations due to reduction in discounts.
However, net profit fell short of Bloomberg estimates of ₹2,085.50 crore due to a substantial increase in commodity prices, advertisement and Auto Expo-related expenses and overall taxes paid during the quarter.
The Delhi-based firm reported an 11.4% increase in the number of vehicles sold during the quarter from last year, courtesy the increase in demand for its offerings such as the Baleno (premium hatchback), the Vitara Brezza (compact sports utility vehicle), the new Dzire (compact sedan) and the new Swift (hatchback). Its entry-level vehicles also reported a growth of 5.6% on a huge base, indicating a turnaround in the rural economy.
Consequently, in the quarter, the company reported a 14.4% year-on-year increase in net sales to ₹20,594.3 crore. Operating profit (earnings before interest and taxes) rose by 24.4% to ₹2,312.5 crore due to higher sales volumes and cost-reduction efforts.
Due to the introduction of new models, discounts offered by the company also reduced to ₹139,000 per unit, compared with ₹151,000 a year ago. As a result, the average realization per unit also increased to ₹4.06 lakh compared with ₹3.93 lakh a year ago.
Royalty payments are also expected to decrease in the next few years as the board of parent company Suzuki Motor Corp. has approved a new royalty structure whereby Maruti Suzuki will be given exemptions for R&D work done in India, and payments will be capped at 5% of the company’s net sales. This insulates the company from any future fluctuations in the exchange rate.
“Maruti Suzuki reported in-line results for Q4FY2018. Strong volume growth coupled with higher realizations due to a better product mix boosted the top line. Regardless of higher employee costs and other expenses, MSIL managed to improve margins on a year-onyear basis due to price hikes and operating leverage,” said Bharat Gianani, research analyst at Sharekhan.