Maruti Suzuki Q4 preview: Brokerages expect slim revenue growth, profit dip

Further details about the expanded Toyota - Suzuki - Maruti partnership, update on demand scenario, channel inventory, discounting trends and new launches will be key moniterables

Maruti Suzuki will release its fourth quarter (January-March) results of the financial year 2018-19 (FY19) on Thursday. Brokerages expect the company to report slim revenue growth due to weak volume and average sale price (ASP) growth -- factors that have plagued the entire auto sector -- and a slip in net profit.

Automobile industry delivered a subdued volume performance in 4QFY19 with single-digit year-on-year (YoY) volume decline across segments led by spill-over effect of muted festive season, which resulted into higher inventory at the beginning of the quarter. Moreover, weak demand led to lower quarterly retail offtake.

"We believe that higher monsoon deficit in few regions of South and West has impacted the rural consumption in past few months impacting rural auto sales in 4QFY19," Reliance Securities said.

Further details about the expanded Toyota – Suzuki – Maruti partnership, update on demand scenario, channel inventory, discounting trends and new launches will be key monitorables in Q4 earnings numbers.

ICICI Securities sees a 15.8 per cent decline on a year-on-year (YoY) basis in Maruti's net profit at Rs 1,585 crore. The volume, too, may fall 0.7 per cent to 4.6 lakh units. The EBITDA (earnings before interest, tax, depreciation and amortisation) is pegged at Rs 2,530 crore, a 16.1 per cent YoY drop.

The brokerage firm expects Maruti to report better numbers sequentially due to absence of any one-offs. 

"The numbers, however, will still be down YoY, primarily tracking de-growth in volumes amid increasing competitive intensity in the marketplace. EBITDA margins are expected at 12 per cent, down 220 bps (basis points) YoY but up 220 bps quarter-on-quarter (QoQ) primarily factoring in a marginal decline in raw material costs. Consequent net sales in Q4FY19 is expected at Rs 20,321 crore, down 1.3 per cent YoY," analysts at ICICI Securities said.

Sharekhan, too, expects a 0.7 per cent YoY decline in Maruti's sales volumes, leading to a flattish topline.

"Elevated cost pressures due to hardening input costs and higher discounting would result in a sharply 210 bps contraction in margins. PAT likely to drop 6.3 per cent y-o-y to Rs 1,764.3 crore, the brokerage firm says. 

It expects a 214.9 bps slip in EBITDA margins to 12.1 per cent and sales to grow 0.3 per cent YoY to Rs 21,230.3 crore.

Maruti's adjusted PAT (profit after tax) may grow 3 per cent YoY to Rs 1,900 crore even though EBITDA margin would contract by 74 bps YoY to 13.1 per cent due to higher discounts, say analysts at HDFC Securities. 

"Maruti would post flat sales numbers (1 per cent decline to 458,000 units). Revenues would grow marginally, up 2 per cent, on a year-on-year (YoY) basis. Net sales is expected at Rs 22,200 crore, a 2 per cent growth YoY," the brokerage firm said.

The auto index has underperformed the broader market rally due to the sector challenges. In last one year, Maruti has dipped over 22 per cent on the NSE (as of Tuesday's cloe) while the Nifty Auto index has lost 24 per cent in the last one year. In comparison, Nifty has gained over 9 per cent in the same time period, ACE Equity data show. 

Entity	CMP as on April 23, 2019	CMP as on April 23, 2018	% change
NIFTY 50	11575.95	10584.70	9.36
Maruti Suzuki India Ltd.	7048.90	9064.85	-22.24
NIFTY AUTO	8682.90	11497.20	-24.48