Stock Fundamentals

Maruti Suzuki: Margin pressure

Parvatha Vardhini C | Updated on January 19, 2018

30Maruti_Co.eps



Backed by strong volume growth of 15.5 per cent, Maruti Suzuki’s net sales jumped 20.4 per cent to ₹14,768 crore in the three months ended December 2015 (over the December 2014 quarter). Despite a 70 per cent drop in other income and higher tax expenses, the company recorded healthy profit growth of 27 per cent to ₹1,019 crore in this period.

But the margin picture was disappointing. At 14.4 per cent, the operating margin is the lowest in the last four quarters. Higher realisations from an improved product mix consisting of the Ciaz, SX4 S-Cross and Baleno, benign input costs and favourable forex movements helped the company record operating margin of 15.8 per cent in the March 2015 quarter and over 16 per cent margins in the June and September 2015 quarters. But higher advertisement spends due to the setting up of Nexa dealerships, a surge in promotional expenses because of discounts offered and increased employee costs have impacted margins this quarter.

With the higher ad spends expected to continue, margins may be under pressure. Besides, the appreciation of the yen against the rupee in recent times will also impact input costs as Maruti imports about 15 per cent of its inputs from Japan. However, price increases in mid-January may help offset margin pressures to an extent.

Published on January 31, 2016

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

null
This article is closed for comments.
Please Email the Editor