Maruti Suzuki Q1FY23 results reports a decent performance

Maruti Suzuki India Limited (MSIL), a subsidiary of Suzuki Motor Corporation, Japan, is India’s largest passenger car maker.. The company has automobile manufacturing and sales operations in India.

On 27th July 2022, Maruti Suzuki announced their Q1FY23 results, where they reported a more than 100% YoY increase in net profits on the back of low base effect as figures for Q1FY22 were affected due to covid-19. While analysts predicted a more than 250% rise in net profits, Maruti Suzuki results failed to meet expectations. Even on the stock exchange, Maruti Suzuki share price has just gone up by 2% in the last two trading sessions after the announcement of Q1FY23 results. Let’s now dig deeper into their fundamentals and analyse their Q1FY23 results thoroughly.

Key Highlights of Maruti Suzuki results Q1FY23:

● Revenue from operations came at ₹26512 crore in Q1FY23, up 50% YoY & down 0.8% QoQ
● EBITDA margin expanded 260 basis points YoY to 7.2%, while it fell 190 Bps QoQ in Q1FY23
● Maruti Suzuki’s profit after tax (PAT) grew to Rs1036 crore, higher by 129.76% YoY , down 45% QoQ
● Maruti Suzuki reported a lower-than-expected quarterly profit as rising input costs and supply chain constraints hurt earnings.
● Their market share in domestic PV declined (excluding Mini) due to the absence of the diesel portfolio. It was 47% in Q1FY22 & 42.6% in Q1FY23.
● It has leadership position in the CNG space with CNG penetration now at 20% of sales volume along with maiden strong hybrid offering in Grand Vitara.

Maruti Suzuki results: Revenue grew 50% YoY while EBITDA grew whopping 134% YoY

Revenue from operations came at Rs 26,512 crore, for the Q1FY23, up 50% YoY but down 0.8% QoQ, as it reported Rs 17,776 crores & Rs 26,512 crores revenue in Q1FY23 & Q4FY22 respectively.

Mauti Suzuki’s EBITDA for Q1FY23 stood at Rs 1,915 crore, up from Rs 819 crore in Q1FY22. EBITDA margin expanded 260 basis points YoY to 7.2%, while it fell 190 Bps QoQ.

Maruti Suzuki results: PAT grew 130% YoY on account of low base effect

Maruti Suzuki’s profit after tax (PAT) came in at Rs 1036 crore, up 129.76% YoY in Q1FY23 from Rs 475 crore in Q1FY22. While on a sequential basis Maruti Suzuki reported a steep decline of 45% QoQ from Rs 1,876 crore in Q4FY22 to Rs 1,036 crores in Q1FY23. Company said the increase in prices of commodities adversely impacted the Operating Profit.

Chairman RC Bhargava has said Maruti will have to shift its focus to bigger cars because the demand for entry-level passenger vehicles – its main source of income – is waning as they become more expensive due to commodity inflation.

Analysts exected that Maruti Suzuki would report net profit growth between 200% and 300% on a low base of last year. It reported a lower-than-expected quarterly profit as rising input costs and supply chain constraints hurt earnings.

Maruti Suzuki results: Market share fell despite growing Volumes

Maruti Suzuki is the market leader in the domestic passenger vehicle (PV) space with market share pegged at 42.6% and popular models being Alto, WagonR, Swift, Brezza,

Baleno, Ertiga, etc., among others. It is also Market leader in each sub-segment – cars (63.6%), UV (19.5%), vans (95.7%).

Moreover, their market share declined (excluding Mini) due to the absence of the diesel portfolio. It was 47% in Q1FY22 & 42.6% in Q1FY23.

Further it has leadership position in the CNG space with CNG penetration now at 20% of sales volume along with maiden strong hybrid offering in Grand Vitara.

During Q1FY23, the firm sold 467,931 vehicles in total. According to a report with the NSE, sales in the domestic market were 398,494 units, while exports reached 69,437 units, a record high for any quarter. Whereas a total of 353,614 units were sold by the company during the Q1FY22, including 308,095 units sold domestically and 45,519 units exported.

The business also stated that around 51,000 automobiles were not produced this quarter due to a scarcity of electrical components (semiconductors). Thus, at the end of the quarter, the number of pending client orders was over 280,000 automobiles.

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Key Management Updates in Q1FY23 Con Call:

● Maruti Suzuki purchased a land parcel of 800 acres in Haryana where manufacturing capacity of 250k vehicles per annum is expected to be commissioned by 2025 with first phase of investment at Rs 110bn.
● Maruti is also betting on cars powered by hybrid technology, natural gas, and biofuels over electric vehicles as India still generates about 75% of its electricity from coal.
● The newly launched Vitara Brezza has phenomenal response with 70k bookings, of which 50% plus booking is for top 2 variants namely ZXi and ZXi plus.
● While the Grand Vitara’s order book stands at 20k which is an intelligent electric hybrid vehicle with already 45-50% of bookings done indicating a positive start.
● JPY(Japanese Yen) benefit on imports comes with a lag; Q1FY23 had a negligible benefit, with the full benefit expected to accrue in Q2FY23.

Technical Analysis of Maruti Suzuki Share Price

As it approached its 52-week low level in March, Maruti Suzuki’s share price had seen a major correction at the beginning of the current calendar year. Later, though, it started to trend upward again. Now that the 50 EMA is above both the 100 EMA and the 200 EMA, the Maruti stock is bullish. Additionally, after the Q1FY23 data is released, investors may want to think about buying the Maruti stock with a medium- to long-term outlook due to its sound fundamentals.

Brokerage firm Motilal Oswal said, “Maruti Suzuki (MSIL) reported an in-line operating quarter driven by higher realization. Favourable product lifecycle is likely to drive volumes, market share and margins, whereas moderating commodity prices and favourable FX are expected to boost margins. We reiterate BUY rating on Maruti Suzuki Share with a TP of Rs 10,700.”

While IDBI Capital remained positive on Maruti Suzuki share and retain BUY with revised price target of Rs 10,047. ICICI Direct also maintained a positive view on the Maruti Suzuki Share as it said, “We retain our BUY rating on Maruti Suzuki Share with TP of Rs 10,000 tracking healthy demand prospects, robust orderbook & encouraging customer response to new launches in the SUV space. Maruti Suzuki is best placed to play upon underpenetrated PV category domestically.”

Our View:

The robust pending order booking, easing of semiconductors supply constraints, new launches in Mid SUV segment and growing exports are favourable factors for Maruti Suzuki.

Additionally, benefit of price hikes, lower metals prices and operating leverage may result in sharp improvement in profitability in the coming quarters. Even the export momentum is expected to remain strong for FY23 and the company’s strategy is to spread across more markets by leveraging its parent distribution network. Moreover, the company is planning to make good for the lost market share with new product launch pipeline along with facelifts especially in UV space.

The auto industry is on a road to recovery after two challenging years of the pandemic. Maruti Suzuki continues to maintain its leadership position in passenger vehicles, but other manufacturers are churning out newer models which are likely to enhance their market share. Absence of an electric vehicle models is a drawback for Maruti Suzuki. With the auto sector showing a recovery, there are other auto companies that are likely to perform better than Maruti Suzuki over next few quarters.

 

About the Author

Ketan Sonalkar (SEBI Rgn No INA000011255)

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice

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