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Dolat Capital Report
Maruti Suzuki India Ltd.’s Q1 FY21 result outcome was disappointing with significantly higher Ebitda loss of Rs 8.6 billion (versus estimated loss of Rs 2.62 billion) due to higher discounts (Rs 25,000 per vehicle) and negative operating leverage.
While personal vehicles demand is back to 85-90% of pre-Covid 19 level, the management believes broad-based recovery is still elusive as it is difficult to predict if the current demand is pent up in nature.
Majority of customers are first-time buyers for entry segment cars. Currently, replacement demand is weak as buyers are postponing discretionary purchases.
While macro level deterioration, supply chain disruption (current production is 4,000 vehicle per day) and falling discretionary sentiment remain overhangs, the company’s strong rural presence (approximately 40% of sales) and low system inventory (85,000 vehicle per 25 days), provides near term hope for volume recovery in festive season.
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