Maruti Q3 profit jumps 24%, high costs hit margins

Revenue rose 13.3% from a year ago to ₹23,457.8 crore, on a 13.2% increase in vehicle sales to 495,897 units.

Maruti Suzuki India Ltd reported a 24% increase in quarterly profit, beating analysts’ estimates, aided by strong demand for its vehicles in the festival season.

Maruti has benefited as demand for smaller cars rebounded at a sharper-than-expected pace during the festive season and thereafter, leading to one of the lowest levels of unsold vehicles at the company’s dealerships. (Ramesh Pathania/Mint)

Net profit rose to ₹1,941.4 crore in the three months ended December 31 from ₹1,564.8 crore in the year earlier, the company said in a statement on Thursday. That compared with the ₹1,859.9 crore consensus estimate of analysts surveyed by Bloomberg.

Revenue rose 13.3% from a year ago to ₹23,457.8 crore, on a 13.2% increase in vehicle sales to 495,897 units. Revenue was also in line with the ₹23,454 crore estimate by analysts. Sequentially, vehicle sales grew 26% from the September quarter’s 393,130 units.

Earnings were boosted by a 26.7% increase in other income (from financial investments) to ₹993.7 crore.

Maruti has benefited as demand for smaller cars rebounded at a sharper-than-expected pace during the festive season and thereafter, leading to one of the lowest levels of unsold vehicles at the company’s dealerships.

Post-festival demand was better than the management’s expectations, and the company started the fourth quarter with a high pending order book and with just 21,000 vehicles as stock at dealerships and 700 at the factory yard, said Shashank Srivastava, executive director of marketing and sales.

“We still have a long way to go before we can compare the current numbers with that of two years ago. The decline is around 33% in the nine-month period. If we pass on the entire increase in cost, then demand might just evaporate. So, we have to keep a balance between the top line and the bottom line,” added Srivastava.

Operating profit rose by just 5.8% to ₹2,226 crore because of a surge in input cost. Operating margin narrowed by 70 basis points to 9.5% from 10.2% a year ago because of a 31% jump in costs of raw materials such as steel, copper and other precious metals.

Maruti managed a sharp turnaround from the June quarter when it reported a loss of ₹249.9 crore, its first quarterly loss because of the nationwide lockdown. The company reported a net profit of ₹1,371.6 crore in the September quarter as vehicle sales improved.