Maruti Suzuki Q1 results: Strong show on robust volume growth

Parvatha Vardhini C BL Research Bureau | Updated on July 26, 2018

The Maruti Suzuki stock fell by about 4 per cent after the June 2018 quarter results announcement based on the lower-than-expected profit growth and margins.

However, the results per se do not leave much room for complaint.

The domestic passenger vehicle volumes for the industry grew by a robust 20 per cent in the first three months of this fiscal.

Maruti Suzuki, the market leader, has seen faster-than-industry volume growth of about 25 per cent in this period. This, along with a 2 per cent rise in realisations due to a superior product mix has helped the company record a 27.3 per cent year-on-year rise in comparable revenues to ₹21,811 crore this fiscal.

The new Dzire and the new Swift as well as the recent facelifts of the S-Cross and Celerio helped growth.

The company witnessed some pressure on the operating margin front from the depreciation of the rupee vs the yen which impacted raw material imports as well as a rise in prices of commodities such as steel.

Yet cost control efforts along with lower advertising expenses helped margins expand.

Operating margin for this quarter stood at 14.9 per cent in comparison with 13.3 per cent in the June 2017 quarter. Operating profits grew by 43 per cent to ₹3,351 crore.

Lower other income, which dropped 60 per cent as well as a 22 per cent rise in taxes prevented this robust performance from reaching the bottom-line.

Thus, despite a strong show on the operational front, net profits grew only by 27 per cent to ₹1,975 crore, much lower than street expectations.


Given the rise in commodity prices and the rupee depreciation, operating profits and margins may come under pressure in the coming quarters.

To its credit, however, the company has brought down its import content on the raw material front to around 10-15 per cent in recent years.

Also, it is expected to begin paying royalty in rupees shortly. This will help shield it from currency fluctuations. Price hikes to pass on input cost escalations will also help margins.

Published on July 26, 2018

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