The Suzuki Motor Corp. unit posted a net profit of ₹1,838.9 crore in the three months ended 31 March, despite challenges posed by rising input costs and semiconductor chip shortages impacting production and sales volumes. The figure surpassed the ₹14,800 crore estimate in a Bloomberg survey of analysts.
Vehicle sales fell 0.7% in the quarter to 488,830 units. Sales in the domestic market fell 8% from a year ago to 420,376 units, while exports surged nearly 93% to a record 68,454 vehicles.
Maruti posted an operating profit of ₹1,779.6 crore in the March quarter, a 42% increase from a year earlier and 95% from the preceding three months, as the automaker recorded net sales growth of 11% from a year earlier and 15% sequentially to ₹25,514 crore.
Improvement in the operating performance came from cost reduction efforts, lower sales promotion expenses, an increase in selling prices and higher non-operating income.
Overall, the company’s financial performance surpassed market expectations.
“Maruti Suzuki delivered a strong performance in 4QFY22 with Ebitd margin coming in at 9.1%, 100bps above our estimate of 8.1%," said Mitul Shah, head of research at Reliance Securities Ltd.
However, chip availability and rising commodity costs will pose challenges for Maruti.
Semiconductor shortages meant Maruti’s pending orders of about 268,000 vehicles by the end of March crossed 300,000 vehicles now, chairman R.C. Bhargava said in a conference call with reporters.
To be sure, the challenge for Maruti is also the shrinking market for entry-level cars.
During FY22, the company’s small and compact car sales fell 3% to 916,643 units. However, sales of mid-size sedans and utility vehicles grew 15% and 27% to 15,869 units and 290,701 units, respectively.
Bhargava said the proportion of price increases of entry-level small cars has been much more than higher-end cars, which is a key reason behind the shrinking market for small cars. Still, the small car segment remains the biggest volume driver for the company.
Meanwhile, Maruti expects to introduce a wider range of new vehicle models this fiscal as it seeks to keep its market leadership. Investors will, however, be watchful on the pace of sport-utility vehicle launches and progress in the electric vehicle space. While the company plans to launch EVs starting in 2025, Bhargava emphasized that Maruti is also focusing on hybrid vehicles. The company’s management also expects strong traction in the export markets to continue, supporting its overall volumes. In addition, the underpenetrated rural market also offers opportunities, and improving prosperity levels in rural India should help sales volume.
Overall, analysts expect the sales of premium products to further increase at Maruti going forward. The company will also enjoy the benefit of a higher market share in CNG variants, as the preference for CNG vehicles has been rising.
