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Maruti Suzuki reports robust performance in Q2FY23, operating margin surprises!

ICICIdirect Research 28 Oct 2022 DISCLAIMER

What’s Buzzing 

Maruti Suzuki (MSIL) reported a robust operational performance in Q2FY23. EBITDA margins for the quarter came in at 9.3%, up 204 bps QoQ. Margin performance was the real positive surprise wherein gross margins expanded 150 bps QoQ while employee costs were down ~59 bps QoQ. 


In Q2FY23, for MSIL, total operating income was at Rs 29,931 crore, up 12.9% QoQ with average selling price (ASP) coming in at Rs 5.52 lakh/unit, up 2.1% QoQ. Sales volumes for the quarter was at 5.2 lakh units, up 10.6% QoQ. EBITDA in Q2FY23 was at Rs 2,769 crore with consequent PAT at Rs 2,062 crore, ~2x QoQ. PAT performance was driven by higher operating margins as well as higher other income. 

Our Perspective 

MSIL is the industry leader in the domestic passenger vehicle space with market share pegged at ~41% as of H1FY23. It has lost market share in the recent past amid absence of any new offerings in the SUV space, which now forms >=50% of the total PV segment domestically. The company, however, plans to recoup the same with new attractive launches/propositions in the SUV domain in the form of new Brezza as well as Grand Vitara with pre-bookings for these models pegged at >1 lakh units amid the overall pending backlog of 4.2 lakh units. MSIL is also steadily moving up the technology ladder with interesting new age connected tech offerings in the refresh models of Baleno, Ertiga, among others. It also continues to strengthen its CNG portfolio with penetration now at ~20% as of Q1FY23 with transition to electric being navigated through hybrid's with its first EV launch planned in 2025. Key monitorables, going forward, at MSIL would be management commentary on margins trajectory amidst better capacity utilisation as supply side issues abate, new product launches in the SUV segment and more affirmative steps on electrification/alternate fuel vehicles including flex fuel. With underpenetrated nature of passenger vehicle segment domestically macros are in favour for MSIL for a healthy profitable growth, going forward.

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