Maruti Suzuki Q4Y17: Performance of Baleno, Brezza to take limelight

Investors had a cautious bias on Maruti Suzuki's stocks, as the company is set to announce its fourth quarter ended March 2017 result.

At 1108 hours, share price of Maruti was trading at Rs 6,391.90 a piece on BSE, down Rs 16 or 0.24%.

Maruti in last three quarters of financial year 2016-17 had manage to report strong performance right from 23% rise in Q1, a whopping 60% growth in Q2 to 48% jump in Q3.

Riding on increased share in higher segment models in Q3FY17, Maruti posted net profit of Rs 1,744.50 crore which grew by 47.46% compared to Rs 1,183 crore a year ago same quarter.

In volume terms sales during Q3 was at 387,251 up by 3.5% against 374,182 in Q3FY16. However, compared to Q2FY17, this volume growth was `below 7.46%.

As Maruti prepares itself to announce last quarter result for FY17, here's what can be expected.

During January – March 2017, analysts expect Maruti's both top-line (revenue) and bottom-line (net profit) to be healthy on the back strong performance from Baleno and Brezza. A little push would also be from newly commenced Gujarat plant.

Starting with volume growth in Q4, Motilal Oswal said, “It is expected to grow by 15% year-on-year (YoY) and 7% quarter-on-quarter (QoQ) basis to 414,439 units, led by continuous better performance from Baleno and Brezza, with ongoing high waiting period.”

Similar opinions were from analysts at KR Choksey and Edelweiss Financial Services.

While announcing the March 2017 sales on April 01, 2017, Maruti had stated that in FY17 it has recorded highest ever total sales of 1,568,603 units including both domestic and exports, which grew by 9.8% compared to 1,429,248 units last fiscal (FY16).

Going ahead driven by improvement in product mix due to compact UV, Vitarra Brezza, and premium hatchback, Baleno, Maruti's net realization is likely to be at Rs 449,769 per unit growing by 6% yoy and 3.3% qoq.

As per Motilal, such performance of net realization will in return boost net revenue by nearly 22% yoy and 10.5% qoq to Rs 18,640 crore this Q4.

However, Motilal expects EBITDA margins will be at 14.6%, contracting b 80 basis point  YoY and 20 basis points qoq led by impact of commissioning of Gujarat plant and higher fixed cost due to same. Higher commodity prices are likely to be offset by hike in prices.

On the same note, Chirag Shah Karthik Subramaniam of Edelweiss said, "Margins to decline 140bps sequentially to 13.4% due to lower gross margins post commencement of the new Gujarat plant.

On the other hand, Ankit Merchant and Shweta Koltharkar said, "We expect the EBITDA margin to improve by 39  basis points Q-o-Q led by lower discounts but decline by 51 basis points as spend on SG&A, employee cost and royalty expenses are expected to go higher.

Following the above reason, the duo at KR Choksey believes EBITDA to be at Rs 2,914.6 increasing by 24% yoy and 17.1% qoq.  While Motilal and Edelweiss sees EBITDA in Q4 at Rs 2,720.9 crore and Rs 2,437 respectively.  

Moreover adjusted net profit is seen at Rs 1,823.1 crore, up 17% yoy and 5% qoq, Motilal said, “This will be led by pre- operative expenses of Gujarat plant taken as extraordinary item and lower other income due to higher yield.”"

Edelweiss expects core PAT at Rs 1,679.7 crore which is a rise of 48.2% yoy but down by 3.7% qoq. 

While KR Choksey estimates Maruti's net profit at Rs 2,117.3 rising by a whopping 86.8% yoy and 21.4% qoq.