BackWhat to expect from Maruti Suzuki’s Q2FY20 results
India’s largest carmaker has recorded maximum year-on-year (YoY) decline in the small car segment for the quarter ended September 2019Maruti Suzuki India Ltd is expected to report one of its toughest quarters later today
PremiumHit by subdued demand in the Indian passenger car market and resultant production cuts to correct inventory levels across dealer network, Maruti Suzuki India Ltd is expected to report earnings of one of its toughest quarters later on Thursday.
According to ICICI Securities, Maruti Suzuki’s July-September revenue is expected to decline about 27% year-on-year (YoY), while EBIDTA (earnings before interest, tax, depreciation and amortization) is likely to contract about 58% on negative operating leverage, lower gross margins, weaker mix and higher variable expenses. The brokerage also expects Maruti’s profit after tax (PAT) to decline about 53% YoY. Profit could have declined further but for higher other income--up 76% YoY at ₹7.4 bln--and lower tax rates.
Motilal Oswal Securities also expects a 27% YoY decline in revenue, and 60% fall in adjusted PAT in Maruti’s Q2 results.
India’s largest carmaker recorded its worst YoY decline in sales in the small car segment in the quarter ended September. During the period, it reported a 62% YoY decline in wholesales in the mini car category, which comprises the most affordable Alto. Besides indicative of weak demand for its basic models, Maruti’s strongest portfolio, this also underlines fast changing consumer preferences in tier one and tier two cities.
Maruti Suzuki had also reported a substantial 23% YoY decline in its compact car wholesales in Q2, leading to 33% fall in its total domestic passenger car sales. The company sells models such as the new Wagon R, Ignis, Baleno, Swift, Dzire, and Celerio in the compact car segment. Its total domestic passenger car sales stood at 3,00,105 units in Q2FY20 compared with 4,49,834 units in the year-ago period.
In the past quarter, the company launched two new cars – small car S-Presso and the six-seater, multipurpose XL6 at a starting price of ₹3.69 lakh and ₹9.79 lakh respectively (both ex-showroom Delhi).
On 25 September, over and above the usual promotional offers to boost sales during the festival season, Maruti had also announced a price cut for select cars - Alto, diesel variants of Swift, Baleno, Dzire etc - by ₹5,000 to pass on the benefit of corporate tax reduction to its customers.
Key issues to watch out would be the company’s outlook on demand during Dhanteras and Diwali, channel inventory management, and trend on discounts.
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