The Maruti Suzuki India Ltd stock has slipped from its 52-week high of ₹17,370 seen earlier this month and fell a further ~3% on Thursday.
In the December quarter (Q3FY26), normalized operating margin (adjusted for the one-time labour code impact of ₹594 crore) declined 70 basis points year-on-year to 12.4%. However, this does not fully reflect underlying profitability, as percentage margins are being distorted by a higher denominator effect.
To illustrate, average price realization increased by ₹62,000 per car year-on-year, but most of this was used to offset higher raw material costs, which rose ₹61,000 per car YoY. As a result, the denominator—selling price and overall sales value—increased sharply, while the numerator—Ebitda—rose at a slower pace, creating the impression of margin compression.
A more relevant metric, therefore, is Ebitda per car. Ebitda per car (excluding other operating revenue) increased from ₹55,000 to ₹57,000. As a result, in absolute terms, normalized Ebitda rose a healthy 21.7% year-on-year to ₹6,166 crore.
Revenue growth
Revenue grew 29.2% year-on-year to ₹47,534 crore, supported by 18% volume growth to 6.68 lakh units.
Export volume growth slowed to just 4% in Q3FY26 versus 42% and 37% growth in Q2 and Q1, respectively. Meanwhile, domestic volume growth turned positive for the first time in three quarters of FY26, rising 21% year-on-year.
This was supported by Goods and Services Tax rate rationalization and Maruti’s price cuts on select models, following a 5% volume decline in each of the two preceding quarters.
Cost pressures
However, fresh challenges are emerging. Steel remains the largest commodity component in the raw material mix for car manufacturing.
Management said safeguard duty imposed on some non-auto grade steel imports into India is being used by domestic steel manufacturers to raise steel prices.
Additionally, negative news flow is weighing on sentiment. Media reports suggest South Africa is evaluating a proposal to double import duty on cars from India to 50%.
On the India-European Union trade deal, even if tariffs on auto imports are eventually reduced to as low as 10%, the lower tariffs will apply only to 2.5 lakh cars annually under a quota system.
This annual quota represents only about 5% of India’s passenger vehicle market, estimated at 4.5 million cars in FY26.
Against this backdrop, Maruti’s relatively expensive valuation remains a concern.
The valuation gap between Maruti and Hyundai Motor India Ltd has widened, with Maruti trading at EV/Ebitda of 19x versus 15x for Hyundai, according to Bloomberg data for FY27.