Q1FY22 Standalone Performance: Maruti Suzuki Analysis
Sales in Q1FY22 stood at Rs. 17,771 crores, a decline of (-26%) QoQ. The YoY increase of 332.7% is due to the low base in Q1FY21.
The Operating profit stood at Rs. 1,329 crores. This was a decline of (-36.1)% QoQ.
Operating margin declined by (-118bps) QoQ to 7.5%. There was a decline of (-360bps) too when compared to Q1FY21.
Profit before tax turned positive to Rs. 564 crores as it was negative in Q1FY21, though sequentially it declined by (-56.9%).
Profit after tax stood at Rs. 441 crores as compared to a loss of Rs. -249 crores in Q1FY21. The PAT declined by (-62.2%) QoQ.
Volumes: Maruti Suzuki Share Analysis
The company posted total volumes of 3,53,614 units in Q1FY21. Although it is a huge growth when compared to Q1FY21, it is also a sharp decline of (-28.2%).
The company has not reached its Q1FY18-19 levels where volume stood at 4,19,479 units.
Units sold in Q1FY21 were 76,599 where 67,027 units were sold in the domestic region while 9,572 units were exported.
The volumes recovered from Q1FY21 lows sharply as seen by Q3FY21 levels, but the momentum was disrupted by the second wave of COVID-19 in domestic markets.
Though domestic volumes have declined, export volumes have been in rising trend since Q1FY21 to Q1FY22.
The domestic volumes in Q1FY22 formed 87.1% of the total volumes and the rest 12.9% was formed by exports.
Retail sales are going up on a week to week basis.
At the end of this month both retail and wholesale are above June levels.
Q1FY22 retail sales 5,10,000 for industry and Maruti close to 2,00,000 which shows ~40% market share.
Business Highlights: Ratio Analysis of Maruti Suzuki
The company temporarily suspended operations in Q1FY22 to divert oxygen produced in plants to emergency healthcare needs.
Company provided all the help it could in the form of oxygen and plants during Q1FY22.
The company has also started COVID-19 vaccination drives for employees and families.
The company has reached a milestone of 50 lakh sales cumulatively in non-urban markets. 40% of sales come from non-urban markets.
The company also expanded Maruti Suzuki smart finance which enables the company to provide finance needs of the customers through online mode.
The company formed tie-ups with financials to support dealer partners.
Customer preference towards CNG continues to rise.
The 3rd SMG plant with annual capacity production of 2,50,000 units was made operational.
Q1FY22 production was affected substantially.
Profit impacted due to lower sales volume and commodity price increase.
CAPEX plans for FY22 are of Rs. 4,500 crores.
Demand: Maruti Suzuki Financial Analysis
Demand in July seems to have picked up in most of the states. There have been pickup in enquiries and booking.
Recovery stood at 85% booking and inquiry if Q4FY21. Bookings recovered 100% in July 2021 when compared to June 2021 levels.
Recovery is coming from both rural and urban regions.
Commodity pressure and price increases.
Increase in prices of commodities caused significant cost pressure. Commodity inflation in Q1FY22 stood at 3.5%.
Cost optimisation programmed step up. Company also lowered sales promotion and advertisement expenses to reduce the impact of rising costs. It also took price increases carefully so as to not disrupt the demand.
Company sees commodity price increase in this quarter. There has been a pretty steep increase in commodity prices.
This has led to a major impact on margins.
The company would be taking price increases gradually as it has already took price increases in Jan (1.3%), April (1.6%) and also a small increase in July.
The company expects a correction in commodity prices after Q2FY22.
Vehicle technology: Maruti Suzuki Performance Analysis
The company aims to align its business activities with the government's goal to reduce crude oil import, reducing carbon footprint and hence it is working on all technology which are available.
The company is taking steps from ICE engine to electrification while also keeping doors open to hybrid, natural gas and biofuels.
Company believes that different customer segments will respond to different technologies differently.
The company is conducting a joint testing programme with Toyota fir prototypes and will get consumer feedback on electric.
Till the charging infrastructure increases, the company aims to focus on hybrids.
The PM has a mission to increase usage of natural gas from 6.3% to 15%. Penetration of CNG cars has gone up rapidly.
The company is also seriously evaluating bio-fuel in the form of ethanol.
The increase in employee cost is the expenditure of covid and hospitalisation of workers.
Some of them won’t be repetitive if covid situation normalises.
Additional and replacement demand
First time buyers last year went up from 43% to 48%. Replacement came down from 26% to 18%. Additional car buying went up by 3%.
Q1FY22 Maruti Suzuki first time buyer came down to 45.4% against 46.9% YoY. Replacement car buying should increase because it was at 25%-26% replacement buying before covid.
Company is facing supply side issues due to semiconductor shortages. Close planning with suppliers mitigated the risk.
Till now the company is doing well compared to other auto companies. The semiconductor shortage is expected to continue for one more year.
The company is focusing on its wide portfolio of cars and adjusting production to variants which won’t need chips which is the reason the company is doing well with production.
Inventory, order book and royalty number
Company currently has 170k pending bookings and the stock levels are at 135k-138k units.
27 days of stock is remaining when compared with Q4 levels of retail.
Royalty for the quarter is 4%.
SUV segment is growing as it was only 26% during FY19-20.
In FY 20-21 the SUV segment was about 32% and during Q1FY22 it was 38%. It reached a peak of 47%-48% in May-21.
Traction is seen mostly Mid-SUV and entry SUV. They contributed 15% and 16% last year respectively.
Company is present in entry SUV with Vitara Brezza which is a market leader by a margin.
Mid-SUV is a weak spot as S-cross hasn’t performed well while Creta and Seltos doing well.
The company believes SUV segment will grow to 42%-45% in next 5 years based on consumer surveys.
SUV pattern in other countries plateaus around 41%-42%, might see same in India as well.
Sedan segment was 23% 5 years back and now about 10% in this quarter. Significant shift from Sedan to SUV.
Market share: Maruti Suzuki Stock Price
Whole sale market share close to 46%. Retail market share is 40%.
Reduction in market share is because:
Mismatch in terms of CNG availability due to oxygen being diverted to industrial usage to medical usage. CNG production for vehicle affected due to the same. CNG market share is 90% hence, this affected disproportionately. If CNG would have been available, the company would have added 5.1% or 5.2% market share.
SUV market share is lower and SUV market share in industry went up. Maruti Suzuki market share without SUV in Q1FY22 was 65.4% increasing by 5.7%. Passenger car market share 62.9% increased by 4.8%. Vans 97.2% up 1.4%.
Issues in stock level operation as in April 30k cars in network were present and less than 2k cars were present in factory.
Lockdown was placed before building up inventory in dealership, hence retail suffered for 1.5 months.
ABOUT INVEST YADNYA
We are the best website for ready-made portfolios. We are the Best Stock Advisory Service In India. Our stock-o-meter covers a very detailed analysis of companies. With best-managed portfolios, one can make sane investments. We have maintained a series of free financial eBooks which keeps you updated.
We also provide you with Articles of different sectors and companies like tata power company, bajaj finance ltd. company, dixon technologies, bandhan bank, tata consultancy services etc.