Maruti Suzuki India Ltd. Quarterly Results Q3FY26 stock analysis

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Sector Outlook: Positive

GST-led demand boosts volume; Margins pressure weighs sentiment

Maruti Suzuki registered healthy revenue of Rs. 49,892 crores during the quarter (up 28.7% YoY / up 17.9% QoQ), primarily driven by higher volumes amidst strong GST-cut led festive demand. The performance versus street estimates remained muted. Gross Profit stood at Rs. 13,673 crores (up 18.7% YoY / up 14.5% QoQ), with gross margin declining to 27.4% (down 233 bps YoY / down 79 bps QoQ). The contraction was largely fueled by adverse commodity prices, ongoing rare earth metal supply constraint, and higher fixed cost per unit. EBITDA stood at Rs. 5,572 crores (up 10.0% YoY / up 9.6% QoQ). The EBITDA margin contracted to 11.2% (down 190 bps YoY / down 84 bps QoQ), primarily on account of higher employee cost under one-time provisioning of New Labour Codes and elevated discount levels, partially offset by favorable operating leverage and product mix. PAT for the quarter stood at Rs. 3,794 crores (up 3.7% YoY / up 14.9% QoQ). PAT margin declined 184 bps YoY / 20 bps QoQ to 7.6%. This was largely impacted by a one-time expense of Rs. 594 crores, driven by provisions for the new Labour Codes. The quarter’s volumes stood at 6,67,769 units (up 17.9% YoY / up 21.2% QoQ). The overall domestic volumes improved by 20.9% YoY to 5,64,669 units. The growth was largely driven by the strong traction observed in the entry level portfolio, supported by healthy growth in the UV space. Export volumes, on the other hand, moderated during the quarter, declining about 6.7% QoQ and up 3.9% YoY. The moderation in export mix is primarily linked to the logistics constraints faced during the quarter.

Valuation and Outlook

Maruti Suzuki reported a mixed bag of numbers in Q3FY26, with operational profits trailing street estimates, while net profit (adjusted for a one-time provision of Rs. 594 crores) came in line. Revenue growth remained healthy, supported by upbeat festive sentiment and a GST-led demand boost, which aided a revival in its small car portfolio. Margins were largely expected to remain under pressure, as a higher concentration of entry-level vehicles diluted realizations, while moderation in export volumes from peak levels and elevated discounts on select models continued to weigh on profitability. Going forward, the company appears well positioned to capitalize on the demand tailwinds arising from the recent GST rate cut, which should support a sustained recovery in entry-level passenger vehicle demand. With a well-diversified portfolio spanning small cars and UVs, Maruti Suzuki is likely to benefit from improving volumes in the mass segment, while continuing to participate in the structurally strong SUV trend through its expanding UV lineup. While weaker realizations driven by an adverse product mix could remain a near-term drag on margins, strong domestic demand, favorable operating leverage and healthy export momentum are expected to contain the downside. Further, the upcoming commissioning of new manufacturing facilities should enhance capacity and execution flexibility, positioning the company well to capitalize on the anticipated demand surge. Over the medium to long term, the company’s scale benefits, localization initiatives and operating leverage should support healthy business expansion.

Key concall Highlights

Industry Commentary

The passenger vehicle industry, which declined 0.4% in H1FY26 YoY, showed a robust rebound in Q3FY26, growing 20.5% YoY, with sentiment elevated by the centre-led GST rationalisation.

Operational Highlights

The management acknowledged the strong revival in entry-level models to be the primary driving force behind the company outperformance of the industry trend.
The company reported its highest ever retail sale during the quarter of over 683,000 units.
Owing to the strong demand witnessed in Q3FY26, the company has addressed the inventory to be around 3-4 days, with a strong healthy orderbook of 175,000 vehicles.
The company has seen a 7% increase in first-time buyers, indicating it as a healthy sign.
The company has also decided to not initiate a price hike in the near-term, with the aim to ride the continuing momentum.

Margin Movement

The downward pressure on margins QoQ were on account of higher commodity prices (60 bps), rare earth element supply issues (20 bps), inventory depletion (50 bps), currency tailwinds (15 bps), price reduction across some models (70 bps) and one-time labour code provisions (125 bps).
These pressures were partially offset by favourable operating leverage (190 bps) and better product mix (120 bps).

Export Guidance

On the export guidance, the company remains on track to achieve its 400,000 unit guidance

Capacity and Greenfield expansion

The company expects the second plant at the Kharkhoda to be operational by April FY26, and the new line at the Gujarat plant to be commissioned shortly after.
Each facility is expected to add an annual capacity of 250,000 units each. The company has addressed this expansion as the need of the hour, as the company senses strong demand going forward, hence requiring an expansion of 0.5 million units.
The company has also announced a greenfield expansion in Gujarat.

SMG Amalgamation

The amalgamation of Suzuki Motor Gujarat Private Limited (SMG), a wholly owned subsidiary, into Maruti Suzuki India Limited (MSIL) became effective 1 April 2025. Accordingly, MSIL has restated its standalone financials.
Post amalgamation, costs earlier embedded within material costs as part of contract manufacturing at SMG have been reclassified to their respective natural heads, such as employee costs and other expenses. Additionally, depreciation of the SMG facility, earlier accounted for as lease rentals under other expenses, is now recorded under depreciation, resulting in an increase of around Rs. 700 crores per quarter. While this reclassification leads to a higher reported EBITDA, management clarified that there is no material impact at the EBIT level or on consolidated financials.