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Maruti Suzuki reports robust performance in Q4FY22

ICICI Securities 30 Apr 2022

What’s Buzzing:

Maruti Suzuki (MSIL) reported a robust performance in Q4FY22 and was a comprehensive beat on Street estimates. EBITDA margins for the quarter came in at 9.1%, up 240 bps QoQ. Margin performance was the real positive surprise with savings realised under all costs line items. Gross margins expanded 174 bps QoQ while employee costs & other expenses were down by ~35 bps & 30 bps respectively.

Context:

In Q4FY22, for MSIL, total operating income was at Rs 26,740 crore, up 15% QoQ with average selling price coming in at Rs 5.22 lakh/unit, up 1.3% QoQ. Sales volumes for the quarter was at 4.9 lakh units, up 13.5% QoQ. EBITDA in Q4FY22 was at Rs 2,427 crore with consequent PAT at Rs 1,839 crore, up 81.8% QoQ. Higher PAT for the quarter was supported by higher operating margins & lower effective tax rate (~16%).

Our Perspective:

MSIL is the industry leader in the domestic passenger vehicle space with market share pegged at ~43% as of FY22. MSIL is steadily moving up the technology ladder with interesting new age offerings in the form of new Baleno as well as new Ertiga and XL6. The company is also approaching the alternate fuel scheme though aggressive push towards CNG vehicles, which are gaining traction in the marketplace amid historic high fuel prices. The company sold >2.3 lakh units of CNG powered vehicles in FY22, highest ever, with present penetration pegged at ~15%, which is expected to inch up, going forward. On the EV front, its cautious approach remains with first EV slated to be launched by 2025. The company is witnessing robust demand prospects with prevailing order book of ~2.68 lakh units as of FY22 (of which ~40% pertains to CNG) amid the need for personal mobility and traction in export markets. The key monitorables, going, forward at MSIL would be margin trajectory amid management indication of rise in steel prices for Q1FY23E, new product launches especially in the SUV segment to capture its lost share with ultimate aim to re-gain the 50% market share mark domestically.

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