Maruti Suzuki stock hits new high after third-quarter margin, earnings top estimates

Shares of Maruti Suzuki India Ltd hit a new 52-week high of 8625 on the National Stock Exchange on Tuesday after the automaker released its December quarter (Q3) results. The company performed well on many metrics. On the one hand, Ebitda margin increased by 250 basis points (bps) sequentially to 6.7% in Q3. In the second quarter, Maruti’s Ebitda margin was 4.2%

Ebitda is earnings before interest, taxes, depreciation and amortization (Ebitda); a key measure of corporate profitability. A basis point is one hundredth of a percentage point.

EBITDA margin performance is a nice surprise in Q3 results. As such, cost reduction measures and price increases were expected to sequentially propel Maruti’s Ebitda margin. However, the magnitude of margin expansion is greater. For example, analysts at Kotak Institutional Equities expected Ebitda margin to increase by 150 basis points in Q3 compared to Q2. “The third quarter EBITDA margin of 6.7% was above broader expectations of 5.8-6%, driven by positive operating leverage, price increases and cost reduction efforts . This was partially offset by higher ad spend,” Nirmal Bang Institutional Equities analysts said in an initial note.

According to Maruti, relatively better sales volume which helped improve capacity utilization, lower sales promotion expenses and higher selling prices were some of the positive factors which contributed to the improvement. margins in the third quarter.

While Maruti’s revenues grew 13% quarter-on-quarter to reach 23,246 crore more or less matches Street’s estimate. The company’s average selling price increased 1.3% sequentially, while volumes increased 13.5%. Note that Maruti’s non-operating revenue declined year-over-year as well as quarter-over-quarter.

Even so, improved operating profit performance helped the company exceed net profit expectations. Maruti’s third-quarter net profit was 1011 crore. For perspective: Bloomberg poll of analysts had estimated Maruti’s net profit at Rs913 crore.

Additionally, Maruti’s commentary on the request sounds optimistic. In addition, the order book looks promising. Maruti said in its press release, “There was no shortage of demand as the company had over 240,000 customer orders pending at the end of the quarter. Although still unpredictable, the electronics supply situation is gradually improving. The company hopes to increase production in the fourth quarter, although it will not reach full capacity.”

Investors are visibly delighted, as evidenced by the more than 6% gain in Maruti shares on Tuesday, a day when the Nifty50 index was up around 0.5%.



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