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Business News/ Companies / News/  Maruti to witness strong recovery in volume in the second half of FY22
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Maruti to witness strong recovery in volume in the second half of FY22

According to analysts, near-term challenges of covid-19 and commodity prices notwithstanding, there are drivers in place for sustained volume and margin recovery from H2FY22E

Maruti Suzuki reported a 9.4% year-on-year decrease in net profit to ₹1,166.1 crore for quarter ended 31 March, owing to substantial jump in input costs due to increase in prices of commodities such as steel, copper and some precious metals. (Ramesh Pathania/Mint)Premium
Maruti Suzuki reported a 9.4% year-on-year decrease in net profit to 1,166.1 crore for quarter ended 31 March, owing to substantial jump in input costs due to increase in prices of commodities such as steel, copper and some precious metals. (Ramesh Pathania/Mint)

NEW DELHI : Maruti Suzuki India Ltd (MSIL), the country's largest passenger vehicle manufacturer, might report a swift recovery in volumes and operating margins in the second half of this fiscal year when the explosive rise in cases of covid-19 infections is expected to abate. Continued shift towards personal mobility, introduction of new products and a faster recovery in rural areas might fuel the recovery, according to analysts of brokerage firms.

“Near-term challenges (of covid-19 and commodity prices) notwithstanding, there are drivers in place for sustained volume and margin recovery from H2FY22E," said analysts of Motilal Oswal Institutional Equities.

“All business parameters, such as industry consolidation, market share improvement, reduced JPY:INR exposure, and improving share of premium products, have improved MSIL’s positioning considerably. After a gap of almost 20 months, we expect new product launches to resume with a mixture of complete product upgrades (five in 2-3 years) and new model launches (three in two years). This should drive volumes and market share growth," they added.

Maruti Suzuki reported a 9.4% year-on-year (y-o-y) decrease in net profit to 1,166.1 crore for quarter ended 31 March, owing to substantial jump in input costs due to increase in prices of commodities such as steel, copper and some precious metals. It reported a 32% y-o-y increase in net sales to 24,023.7 crore on the back of 27.8% jump in total vehicle sales to 492,235 units due to gradual recovery in vehicle sales across the country.

The operating margins though contracted by 20 basis points to 8.3% compared with 8.5% in the corresponding period as a result of a sharp 45.13% increase in raw material cost, 11% in other expenses.

“Demand may observe a temporary break given the second wave of pandemic surging across the country but may strongly bounce back once it fades off. Going forward, we believe that newer launches, higher capacity utilization rates and price hikes should trigger a superior volume and margin profile in FY22 and ensuing year," said analysts of LKP Securities.

Manufacturing of automobiles came under pressure from the first week of April when the state government of Maharashtra announced lockdown measures to contain the rising cases of covid infections. Subsequently, other states such as Delhi, Haryana, Karnataka, and Tamil Nadu also followed suit. Leading automobile manufacturers such as MSIL, Hero MotoCorp Ltd, and Hyundai Motor India Ltd have either stopped production at their factories or reduced output significantly.

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Published: 15 May 2021, 12:06 PM IST
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