Margin pressures outweigh volumes, may keep Maruti Suzuki stock subdued

The company is cautious on passing on raw material cost hikes to protect volumes

Maruti Suzuki’s operating performance was sub-par in the December quarter (Q3), despite the robust growth in volumes.

With demand reviving, the country’s largest passenger vehicle maker registered 13 per cent year-on-year (YoY) and 26 per cent sequential growth in volumes.

While the growth in volumes came on the back of festival demand, higher rural segment contribution, and year-end sales, gains on the operating leverage front were nullified by a sharp jump in raw material costs. Operating profit margins were flat on a sequential basis and down 67 basis points YoY to about 9.5 per cent largely due to the 300-basis-point (bp) impact