Narnolia expects revenue to decline 13 percent YoY largely driven by contraction in volume growth
Country's largest passenger vehicle maker Maruti Suzuki is expected to register double-digit fall across parameters in June quarter with steep contraction in margin and volume year-on-year.
Maruti Suzuki sold 4.01 lakh units in June ended quarter, lower by 18 percent compared to year-ago and 12 percent, sequentially.
Consequently, company's profit is likely to decline 30 percent year-on-year and revenue may fall around 13-15 percent compared to year-ago.
The increase in realisation in the range of 4-6 percent YoY due to better product mix and price hikes could support topline to some extent.
"Revenues are expected to decline 14 percent YoY in Q1FY20, which will be offset by 4 percent YoY increase in average sale price (ASP) due to an increase in costs owing to new safety regulations," Kotak said.
Narnolia expects revenue to decline 13 percent YoY largely driven by the contraction in volume growth, but said realisation will improve 6 percent YoY on account of better product mix and price hikes.
EBITDA could fall more than 40 percent year-on-year and margin may contract in three-digit YoY due to higher discounts and industry-wide slowdown, it added.
Kotak expects EBITDA to decline 42 percent YoY (down 14.4 percent QoQ) in Q1FY20 led by a rise in commodity costs, negative operating leverage and high fixed costs in the Gujarat plant due to low volumes. Margin may fall 490 bps YoY (down 53 bps QoQ) to 10 percent in Q1, the brokerage said.
The second line of Gujarat plant has commenced production from January 2019 and is currently producing Swift and Baleno models. The recent slowdown will further put pressure on overall profitability due to slow ramp up.
According to Motilal Oswal, margin could decline 470bps YoY (down 30bps QoQ) mainly due to higher discounts and operating deleverage. EBITDA is estimated to decline by 42 percent YoY (down 14 percent QoQ).
Key issues to watch out for would be channel inventory, discounting trends and new launches, and demand trend in urban and rural areas.
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