Maruti Profit Misses Estimates On Margin Pressure, Higher Tax Rate
Maruti Suzuki India Ltd.’s profit rose for the fifteenth straight quarter, but missed analyst estimates due to a higher effective tax rate and lower than expected margins.
Net profit rose 10 percent year-on-year to Rs 1,882 crore for the quarter ended March due to the higher tax outgo and finance costs, Maruti said in its stock exchange notification. That compares with the Bloomberg consensus estimate of Rs 2,085 crore.
Margins for India’s largest automaker rose marginally to 14.2 percent but remained well below the estimated 15.6 percent due to higher other expenses, and rising advertisement and commodity costs. The operating income or the earnings before interest tax depreciation and amortisation rose 18 percent year-on-year to Rs 3,015 crore. That too fell short of estimates.
“The operating income rose on account of higher sales volume, cost reduction efforts, partially offset by adverse commodity prices and higher advertisement expenses.” the automaker said in a press release accompanying the earnings filing.
Any improvement in margins is expected only after the second half of the current financial year, led by a combination of price increases and volume growth, Avinash Gorakshakar, head of research at Joindre Capital Services told BloombergQuint.
Revenue rose 15.5 percent to Rs 21,166 crore as compared with the same quarter last year. That’s marginally higher than the estimated Rs 20,975 crore. The top line was supported by a sales growth of 11.4 percent on a yearly basis as Maruti sold 4.61 lakh units in the first three months of the year, led by hatchbacks such as the Swift and the Vitara Brezza compact SUV.
Shares of Maruti Suzuki erased gains and fell as much as 1.3 percent to Rs 8,772 apiece after the earnings announcement. The stock fell 8.9 percent during the three months ended March, the biggest quarterly decline in over a year. That compares with a 9.9 percent decline in the NSE Nifty Auto Index.
Key highlights from the media conference:
- Realisations grew 3.6 percent on a yearly basis.
- Market share rose to 50 percent this year.
- Commodity cost increased due to higher aluminium and steel prices.
- Cost reduction efforts partially offset by adverse commodity prices.
- Royalty for the year has come down to 5.4 percent from 5.8 percent.
- Board has approved setting up two funds including employee welfare fund.
- Will transfer 1 percent of the net profit to each fund.
- Another fund will be for scientific work; details yet to be worked out.
- Board recommended a dividend of Rs 80 per share.