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Maruti Suzuki: Strong finish - Views on News from Equitymaster
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Maruti Suzuki: Strong finish
Apr 28, 2016

Maruti Suzuki announced its results for the fourth quarter and full year ended March 2016 recently. The company reported a 12% YoY growth in sales, while net profits fell by 12% YoY. Here is our analysis of the results.

  • Net sales grow by 12% YoY led by higher realisations as volumes are up 4% YoY.
  • Operating profits grow 9% YoY as margins contract by 0.9% to 15.4% in 4QFY16. The same is due to higher other expenditure (as a percentage of sales).
  • Shrinking operating margins coupled with lower other income and higher tax expenses lead to the 12% YoY fall in the bottomline.

    Financial performance: A snapshot
    (Rs m) 4QFY15 4QFY16 Change FY15 FY16 Change
    Total Vehicles Sold (No.) 346,712 360,402 3.9% 1,292,415 1,429,248 10.6%
    Net sales 136,248 153,057 12.3% 499,706 577,463 15.6%
    Expenditure 114,605 129,557 13.0% 432,577 487,678 12.7%
    Operating profit (EBDITA) 21,643 23,500 8.6% 67,129 89,785 33.7%
    EBDITA margin (%) 15.9% 15.4% 13.4% 15.5%
    Other income 3,199 1,212 -62.1% 8,316 4,619 -44.5%
    Finance costs 1,027 203 -80.2% 2,060 815 -60.4%
    Depreciation 6,600 7,608 15.3% 24,703 28,239 14.3%
    Profit before tax 17,215 16,901 -1.8% 48,682 65,350 34.2%
    Tax 4,373 5,565 27.3% 11,570 19,636 69.7%
    Profit after tax/(loss) 12,842 11,336 -11.7% 37,112 45,714 23.2%
    Net profit margin (%) 9.4% 7.4% 7.4% 7.9%
    No. of shares (m) 302.1 302.1
    Diluted earnings per share (Rs)* 151.3
    Price to earnings ratio (x)* 25.6

    (* On a trailing 12-month basis)

  • What has driven performance in FY16?

    • Maruti Suzuki's revenues during the year grew by a healthy 16% YoY with volumes up by 11% YoY. Realisations were driven by product mix and lesser discount on models. In the domestic market, the 11.5% YoY volume growth was largely led by the super compact and mid-size segments as volumes grew 106% YoY and 64% YoY respectively. But these were not the only segments that did well. Utility vehicles (UVs) grew by a healthy 38% YoY, while vans logged in volume growth of 11% YoY. Having said that, the two main segments for the company (together accounting for 75% of domestic volumes) are mini and compact and volume growth for these was relatively tepid at 2% and 9% respectively. Exports were subdued during the year as volumes were up 2% YoY.
    • Maruti's operating margins during the year improved by 2.1% to 15.5% on account of a fall in raw material costs (as percentage of sales). Fall in raw material costs was attributed to softening commodity prices as well as initiatives to reduce material costs. Other expenditure was higher on account of increased ad spends.
    • Although the profit before tax (PBT) grew by 34% YoY during the year in tandem with the growth in operating profits, net profits grew at a slightly lower rate of 23% YoY on account of higher tax expenses. This is despite the reduction in interest costs.
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