Higher exports, adverse commodity prices: five takeaways from Maruti Suzuki’s Q2 results

Maruti Suzuki , India’s biggest carmaker by volume, reported its second-quarter results on Friday. Its second-quarter revenue rose marginally by 1.7% to ₹55,087 crore, while PAT rose 7.3% to ₹3,293 crore. Its shares closed 0.31% lower on Friday at ₹16,155 apiece.

Here are five takeaways from the second-quarter results:

1. Muted domestic demand: Maruti Suzuki reported a 5.1% decline in domestic wholesales in the second quarter to 4,40,387 units. The carmaker attributed the decline to customers deferring purchases for the better part of the quarter due to the pre-emptive price reduction triggered by the GST reforms, which came into effect from September 22.

   It should be noted that Maruti Suzuki had a highly successful festive season, with deliveries touching almost 51,000 vehicles—the highest-ever on Dhanteras, beating the previous record of 41,000 vehicles. Production was running through Dhanteras and continued on Sunday to meet customer demand, although the company said it was running short of vehicles across models. Besides, Maruti Suzuki achieved record-breaking sales during the Navratri festival, delivering around two lakh vehicles this season.

   “Traction is very good. Every day, we are seeing around 14,000 bookings. Since announcing the reduced prices, we have received 4.5 lakh bookings, of which 1 lakh are for small cars. Retail bookings total 3.25 lakh. This has broken all records for Maruti Suzuki, with growth of more than 50% over the same period last year. Still, a few more days are left,” Partho Banerjee, senior executive officer, sales and marketing, had remarked then.

2. Unabated export robustness: Maruti Suzuki has been redoubling its export efforts as a counteracting force against muted sentiments in the domestic markets. Its exports jumped 42.2% to 1,10,487 units in the second quarter. The gain in exports helped the carmaker report a marginal 1.7% increase in its overall sales volume to 5,50,874 units.

3. Higher material cost weighed on profitability: Maruti Suzuki’s material cost increased by 100 basis points in the second quarter, which the company attributed to adverse commodity prices and an unfavourable movement in foreign exchange.

4. Advertisement and discounts: Maruti Suzuki also incurred higher sales promotion expenses and limited-time price correction in some models, along with higher advertisement expenses, and new plant-related expenses pertaining to the Kharkhoda greenfield plant.

5. Highest net sales: During the quarter, Maruti Suzuki reported its highest-ever net sales of ₹40,135.9 crore, compared to 35,589.1 crore in the same period of the previous year.