Maruti Suzuki Q2 Preview: Profit, Revenue Seen Rising Despite Chip Shortage

Maruti Suzuki India Ltd.’s profit and revenue are expected to rise in the second quarter even as a global chip shortage weighs on the supply chain.

Net profit for India’s largest carmaker is seen to rise 57% sequentially to Rs 691 crore in the quarter ended September, according to the average of analysts’ estimates compiled by Bloomberg.

• Standalone revenue may increase 10% over the preceding quarter to Rs 19,535 crore.

• Operating income is estimated to rise 39% quarter-on-quarter to Rs 821 crore.

The maker of Dzire and Baleno is set to announce its second-quarter results on Wednesday.

ICICI Securities expects the automaker to report a 9% sequential growth in revenue despite domestic passenger vehicle volumes impacted by production cuts and export growth, albeit on a lower base. It sees realisation to expand due to price hikes taken in Q2.

Nirmal Bang expects Maruti Suzuki’s earnings to be relatively weak due to muted volumes (hit by chip shortages) and pressure on profitability. “Overall, we expect Ebitda margin to improve 110 basis points quarter-on-quarter on account of positive operating leverage, price hikes, lower discounts and cost controls, which should be partially offset by higher raw material costs.”

According to Motilal Oswal, “discount moderation” may drive quarter-on-quarter margin improvement for the company.

Maruti Suzuki’s sales, however, rose 7% sequentially to 3.79 lakh units in the quarter ended September.

The semiconductor shortage has been hurting the company’s volumes over the last three months. It has cut production in August and September, and is not sure when the supply will improve.

The company estimated production volume to be around 40% of normal production in September, after halting production for three consecutive Saturdays and cutting one shift in August. It also said production volume would slump to 60% of the usual level in October—a month that marks the beginning of the festive period considered auspicious for new purchases. It’s even crucial for automakers looking to make up for lost sales after the second wave of Covid-19.