Low-base effect and higher sales of models like Swift and Ertiga saw the country's largest car manufacturer Maruti Suzuki beat street expectations to post a near two-and-half times jump in its net profit at R501.29 crore during the October-December period.
The net profit during the same period last fiscal was R205.62 crore when the company's output was hit by a labour strike at its Manesar plant.
In fact, Maruti posted a rise in profitability after a gap of six quarters. The company’s net sales during the period rose 45.56% at R10,956.95 crore against last year's R7,527.10 crore. While the low base of Q3 last year, when production was low because of a labour dispute at its Manesar plant, helped boost profits, the strong improvement in the bottom line also came from a more favourable product mix aligned towards higher margin products like diesel cars and more premium models such as the Ertiga MPV.
Meanwhile, the rupee’s depreciation also helped Maruti gain from higher export realisation. Better-than-expected earnings saw the company's shares close up 4.15% at R1,600.20 on the BSE.
Chairman R C Bhargava said that apart from the low base effect, a huge benefit came from the doubling of diesel car sales such as the Ertiga and Swift Dzire during the period.
“In this quarter, we sold over a lakh diesel cars as compared to 50,000 units in the same quarter last year. Rupee’s depreciation and cost reduction measures also helped boost margins, but the benefit of Yen depreciation will only come in the next quarter,” he said.
Though the company did not provide any sort of guidance regarding sales in the coming quarters, Bhargava told FE that he does not see industry sales to pick up in the next quarter as well as the next fiscal. Ruling out any cut in excise duty in the upcoming Budget for cars he had said that the only trigger for sales would be higher economic growth. “So far nothing has made sales better than what it has been in the last few months. Duty cuts will not happen...Looks like the next fiscal will also have single-digit growth and we (Maruti) should be more and less at the same level,” Bhargava said.
Car sales so far this fiscal are down on the previous twelve months and are on track to post their lowest growth in nine years, according to the industry body Society of Indian Automobile Manufacturers (SIAM).
Arun Agarwal, analyst