Maruti Suzuki Q2 result: Here's what brokerages have to say
Most brokerages have cut their earnings estimates to factor in chip shortage impact
Shares of India’s largest passenger vehicle Maruti Suzuki were trading flat at Rs 7,334 per share, a day after its net profit dropped 65.3% to Rs 475.3 crore in Q2FY22 from Rs 1,371.6 crore in Q2 FY21. Net sales rose by 9.1% YoY to Rs 1,929.78 crore during the quarter. Operating EBIT (Earnings Before Interest Tax) declined by 91.5% to Rs 98.8 crore in Q2 FY22 from Rs 116.77 crore in Q2 FY21. The Operating EBIT margin was 0.5% as on 30 September 2021 as against 6.6% as on 30 September 2020.
The company further said that an estimated 116,000 vehicles could not be produced owing to the electronics component shortage mostly corresponding to the domestic models. The company had more than 200,000 pending customer orders at the end of the quarter for which the company is making all efforts to expedite deliveries.
Maruti Suzuki said that the quarter was also marked by an unprecedented increase in the prices of commodities like steel, aluminium and precious metals within a span of one year. The company made maximum efforts to absorb input cost increases offsetting them through cost reduction and passed on minimum impact to customers by way of the car price increase.
With such a dismal Q2FY22 number brokerages have a mixed view on the counter, here is what they have to say
JP Morgan | Rating: Underweight | Price target: Rs 6,300
Maruti’s Q2 results were significantly below consensus forecasts. Financials of the company are likely to be weak unless significant improvement takes place in launch movement. That apart market share losses are resulting in inadequate price hikes. Citing these JP Morgan has cut its FY22/23/24 EPS (Earnings Per Share) by 18%/9%/3% respectively.
Credit Suisse | Rating: Outperform | Price target: Rs 8,759
Production normalisation, margin recovery and strong new model cycle will be tracked closely. Factoring hit from chip supply Credit Suisse has also lowered its FY22-24 EPS by 2-6%. However, the global brokerage firm retains outperform rating on the stock on strong industry growth expectations and is positive on impending new model cycle and benign valuations.
Phillip Capital | Rating: Neutral | Price target: Rs 7,240
Though demand for Maruti Suzuki remains robust much growth is being driven by SUVs and upgrade customers where Maruti has limited presence resulting in loss of market share for the company. Additionally, higher commodity prices and limited room for price hikes continues to be an ongoing risk to the margins in near term. Margins to remain under pressure for the next few quarters. Optimistic on the outlook over medium to long term owing to low PV penetration and trend reversal away from shared mobility, want of exciting product launches could negatively impact Maruti’s market share.
Competition has stolen the march in the B segment, see Maruti gaining share only with new product launches(hybrid). Lower estimates for volumes and margins for FY22 by 4.5% and 180 basis points respectively.
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