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Maruti Suzuki Q2FY19 Result Expectation

Maruti Suzuki India Limited (MSIL) Q2FY19E result expectation:
Expectations for Q2FY19E*:
  • Revenue: Rs23,629cr (up 9% yoy, 5% qoq); The revenue growth rate of 9% yoy will be a multi-quarter low, lowest in more than 12 quarters. Volume during Q2FY19 declined 1.5% yoy (1% qoq) due to subdued demand, sectoral headwinds and a high base of the year-ago period (volume growth in Q2FY18 was 18% yoy and 25% qoq). We expect realization growth to remain strong at 10% yoy (6% qoq). The recent discounts being offered by MSIL are a concern, since it indicates weak demand trajectory going ahead. MSIL being the sector leader, the discounting trend is a worrisome signal for the whole PV space.
  • EBITDA: Rs3,774cr (up 3% yoy, 13% qoq).
  • EBITDA margin: 16% (contraction of 92bps yoy, expansion of 105bps qoq). Unfavourable currency and higher input costs will lead to margin contraction for MSIL.
  • PAT: Rs2,471cr (flat yoy, 25% qoq).
*Based on Bloomberg consensus expectations
Q1FY19 performance highlights:
  • Revenue: Rs22,459cr (up 28% yoy, 6% qoq); led by 24% yoy (6% qoq) volume growth and 3% yoy (flat qoq) realization growth. Volume growth for the company continued to be satisfactory led by strong demand for Swift, Dzire and Vitara Brezza. Given that most of these were recent launches, they were being sold at little or no discount. Hence, realization growth was healthy.
  • EBITDA: Rs3,351cr (up 44% yoy, 11% qoq)
  • EBITDA margin: 14.9% (expansion of 163bps yoy, 68bps qoq); EBITDA and EBITDA margin missed consensus of Rs3,451cr and 15.3% respectively. The miss (vis-à-vis consensus expectation) at operating level was marginal as the company was able to offset increase in input cost through price hikes. Also, cost reduction efforts led to slower growth in employee costs and operating and manufacturing expenses. Additionally, MSIL reduced advertisement expenses in Q1FY19 in a bid to cut costs.
  • PAT: Rs1,975cr (up 27% yoy, 5% qoq); PAT performance was further pulled down by lower other income which was 60% yoy lower (54% qoq lower). Other income tends to be lumpy from one quarter to another and is not a matter of concern.
Comments – Investors will watch out for following cues from management commentary post result announcement
  • Discounting scenario prevalent in the PV space
  • Progress of festive season
  • Timeline for new launches

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