Maruti Suzuki shares plunge by 7% in 4 days ahead of Q4FY19 numbers: This is what experts think about automaker's result

Continuing the selling momentum for fourth consecutive day, Maruti Suzuki shares dropped by over Rs 100 on Thursday, after touching an intraday low of Rs 6923 per piece on Sensex. At around 1209 hours, Maruti shares were trading at Rs 6984.35 per piece down by Rs 40 or 0.56% on Sensex. With that, Maruti which ended near Rs 7,441-level on Friday last week, has plunged by 7% in just four days of trading session. The loss of investors' love in Maruti, is due to March 2019 quarter (Q4FY19) result which will be presented by the company today. Experts are at view of negative Q4FY19 for Maruti.

In Edelweiss Securities view, "Expect revenue growth of only 1% YoY, due to a weak volume and ASP growth. Operating margins are expected to improve more than 170bps sequentially, due to lower cost pressures and moderating incentives." According to Edelweiss, Maruti's market share remained broadly same with flat domestic sales growth YoY. Weak car sales were offset by improvement in the utility vehicle segment.

On the other hand, Phillip Capital analysts expect Maruti's revenue to decrease by 3.5% yoy due to slump sales. Also, EBITDA margin to increase by 310bps qoq led by decreased incentives, decrease in RM cost. 

Similarly, IDBI Capital said, "We expect revenues to decline by -1.8% YoY (+5.7% QoQ) to Rs207bn. Volumes for the quarter decline marginally by -0.7% YoY/+7% QoQ to 458k units. EBITDA margin to stand at 11.7%. Adj. PAT to decline -14.8% YoY (+7.7% QoQ) to Rs16bn."

Not only this, even analysts have reduced their rating outlook for the automaker's shares.

Earlier, Kotak Institutional Equities had said, "Our analysis suggests that car demand is likely to remain sluggish due to – (1) increase in car prices led by safety and emission regulations and (2) slowdown in urban demand. In 4QFY19 rural demand also slowed down, which led to a rise in dealer inventory levels (45 days at the end of March 2019 versus 15 days at the end of December 2018). We expect MSIL to gain market share by 130 bps over FY2019-21 largely led by an increase in the share of petrol vehicles in the industry mix due to the sharp rise in diesel vehicle costs once BS-VI regulations are implemented in April 2020."

Kotak's analysts had added, "We cut our earnings estimates for MSIL by 10-12% over FY2020-21 mainly driven by a 4% cut in our volume estimates and 100-110 bps cut in our EBITDA margin estimates. We have decreased our fair value to Rs 6,700 (from `7,500 earlier). We value the company at 22X our March 2021E EPS + Rs 1,423 mn of cash and cash equivalents. We downgrade the stock to REDUCE from ADD earlier." 

Maruti has already posted its sales number for FY19. Between April 2018 - March 2019, Maruti's sales have surged by single-digit of 4.7% with 1,862,449 units compared to 1,779,574 units in FY18. Domestic sales in FY19 jumped by 6.1% with sales of 1,753,700 vehicles as against 1,653,500 vehicles sold in FY18. On the other hand, Marut's export sales declined by 13.7% to 108,749 units in FY19 versus 126,074 units in FY18.

In Q3FY19, Maruti posted a disappointing quarter with net profit of Rs 1,489.3 crore down by a huge 17.21% from Rs 1,799 crore in the corresponding period of previous year. Meantime, Maruti Suzuki revenue from operations was at Rs 19,668.3 crore in Q3FY19, witnessing a sequential rise of 1.99% from Rs 19.283.2 crore in Q3FY18.