• JULY 23, 2003

Maruti: '800' sales rise 63%

Maruti has posted a sharp spurt in sales and net profit for the first quarter ended June 2003. Net profit in 1QFY04 stood at Rs 1,231 m as compared to Rs 115 m in the same period last year. This was led by a robust growth in volume sales in 1QFY04. Unit sales increased by 47% to 104,017, which includes exports of 12,496 units (12% of unit sales). Detailed results are not yet available.

This impressive performance on account of higher sales of Maruti 800, the company's flagship model in Segment 'A'. Sale of Maruti 800 in 1QFY04 was 40,777 units (39% of total volumes and a 63% rise YoY). The company had indicated during its IPO that the financing arrangement with SBI has improved the affordability factor and thus had boosted overall volumes. Just to put things in perspective, as against the monthly sales of around 7,500 units in January 2002, Maruti 800 sales has touched 13,126 units in June 2003. Apart from Maruti 800, the company has also posted higher growth for its Segment 'B' models like Alto and Wagon R.

Volume snapshot...
(Units) 1QFY03 % of sales 1QFY04 % of sales % YoY growth*
Maruti 800 25,017 35.4% 40,777 39.2% 63.0%
Alto 5,577 7.9% 8,143 7.8% 46.0%
Wagon R 6,410 9.1% 10,512 10.1% 64.0%
Zen NA - 14,239 13.7% -
Exports 3,529 5.0% 12,496 12.0% 254.1%
Total of the above 40,533 57.3% 86,167 82.8% -
Total sales 70,759   104,017   47.0%
(*1QFY04 over 1QFY03, Source: Company website)

For April-June 2003, sales of the Alto touched 8,143 units, 46 per cent higher than April-June 2002 with 'Wagon R' also registering a 64% rise in sales. Given this impressive domestic sales, Maruti has managed to increase its overall market share from 52% to 55% in 1QFY04. Bulk of this could have been on account of higher sales in Segment 'A' where Maruti holds almost 100% market share. However, we expect the company's market share to decline in Segment 'B' for FY04 given the success of Hyundai's most recent model, 'Santro Xing'.

We expect the waiver of royalty on models like Maruti 800, Zen and Omni by Suzuki to have improved operating margins significantly in 1QFY04 (royalty towards these models accounted for 1% of sales in FY03). This combined with lower interest outgo could have benefited the company.

The stock currently trades at Rs 176 implying a P/E multiple of 10.3x annualised 1QFY04 earnings. While the company's performance in 1QFY04 is impressive, we expect the market share to come under pressure towards the second half in Segment 'B'. It remains to be seen whether the volume growth witnessed in the June quarter will sustain going forward.

Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

Equitymaster Agora Research Private Limited (Research Analyst)
103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407