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Sector Outlook: Netural
Earnings fell short on all front
MSIL reported a mixed quarter with revenue at ₹355,891 million, up 0.2% YoY and 5.1% QoQ, missing market estimates of ₹372,290 million. Growth was led by strong exports and better realizations. EBITDA margin declined 105 bps YoY to 12.4% due to higher promotion costs and commodity prices, partly offset by favorable forex and non-operating income. PAT fell to ₹30,692 million, impacted by deferred tax liability provisions. Total volumes were 541,550 units, down 1.9% YoY, with domestic volumes dropping 3.9% YoY amid PV market pressures, while exports grew 12.1%, reflecting healthy recovery. Average car discounts stood at ₹29,300.
Key Concall Highlights
- The company expects retail sales to grow 3% to 4% for the year, and they have already achieved 3.9% growth until October.
- Inventory is expected to be at a healthy level of about one month or even lower by the end of the month.
- The company is comfortably placed as far as inventories are concerned, which reduces the pressure on discounts.
- The company aims to maintain an inventory level of about a month, as having it below that may result in some colours or variants not being available to customers due to the considerable range of portfolio models.
- The company is launching a high-spec electric vehicle (EV) campaign to increase EV adoption and give customers confidence. The company will export the EV, which will be made in India for the global market, including advanced markets like Europe and Japan.
- The Board gave in-principle approval for the amalgamation of SMG with Maruti Suzuki India Limited (MSIL). The appointed date for the amalgamation is 1st April 2025, subject to all legal and regulatory compliances.
- The company is closely watching the macro environment, including commodity and Forex markets, to make appropriate hedging decisions.
- Consumer preference towards CNG vehicles continues to increase, with one in every three cars sold by the company being a CNG vehicle in quarter two of this fiscal year.
- Demand appears to be quite healthy in the ongoing festive season, with a 14% YoY growth in retail sales from the beginning of Shraddh until Diwali.
- The pressure on discounts is not expected to continue, as it is typically driven by inventory, and the company is comfortably placed in terms of inventories.
- The company has commenced exporting its made-in-India Fronx SUV to Japan, marking the first Maruti Suzuki SUV to be launched in Japan.
- The company managed to arrest the decline in entry-level models owing to its limited editions.
Valuation and Outlook
MSIL reported a weak quarter, missing estimates amid high industry inventory. Revenue grew, driven by higher UV sales, but margins were pressured by increased discounts, partially offset by favorable forex and cost control efforts. Strong export demand signaled recovery, while the domestic market saw YoY decline due to inventory challenges. The company is optimistic about festive demand, noting 14% growth. Moving forward, MSIL aims to leverage its UV portfolio, expand capacity, and cater to evolving fuel preferences, with plans to start its EV campaign soon. Despite sectoral challenges, MSIL’s product range and market position support a positive growth outlook.
