With consumer spends unlikely to pick up soon and competition on the way, volumes this year could be subdued.
Significantly higher realisations and higher exports have helped the Rs 20,455 crore Maruti Suzuki post a strong top line growth of 32 per cent in the March 2009 quarter. While volumes were up just 17 per cent during the period, India’s biggest car company has managed to sell more of its bigger models, which have fetched it better prices. Exports of the A-star also contributed to the revenues, though currency fluctuations resulted in a forex loss of around Rs 120 crore.
If one was to ignore the losses, the company’s operating profit margin has risen 190 basis points sequentially to 8.1 per cent — the OPM was 8.2 per cent in the September 2008 quarter. Also, the net profits for the quarter would not have fallen had the forex losses not been incurred. With prices of commodities easing, it’s possible operating margins will improve in the current year to around over 9 per
However, it’s the top line that could be under pressure because although demand in the rural areas remains fairly buoyant, consumer spends are likely to remain subdued and it’s unlikely that the momentum in volumes seen in the March quarter will sustain. The Swift and the Dzire should continue to do well because they will be available in larger numbers in their diesel versions — Maruti will have access to more diesel engines this year.
However, the Swift could face some competition from the Honda Jazz, which is slated to be launched in June, and possibly from the diesel version of the Hyundai i10, while the Dzire could see some competition from the i20. Maruti of course, will unveil the Ritz, in both petrol and diesel versions, sometime in the next few
Industry watchers believe Maruti’s volumes could grow by about 10 per cent in the current year, driving up sales by about 15 per cent. The stock has rallied by about 46 per cent since the start of the year but at the current price of Rs 803 trades at a somewhat expensive 14 times the estimated 2009-10 earnings.
