Maruti Suzuki’s Q3 profit rides high on volume, mix, softening RM costs

Fueled by robust improvement in vehicle dispatches, a higher mix of sports utility vehicles and softening of commodity prices, India’s largest passenger vehicle maker Maruti Suzuki India posted a 33% on-year growth in its standalone net profit for the December quarter.

The automaker’s net profit came in at Rs 3,130 crore, against Rs 2,351.3 crore in the year-ago period. Revenue from operations increased around 15% on year to Rs 33,308.7 crore, primarily on the back of 7.6% on-year growth in sales volume during the quarter to 501,207 units.

The rate of growth of revenue was higher compared to volumes as a result of a higher mix of sports utility vehicles which improved the average selling price. The company’s management noted that the average selling price went up by 6% during the quarter on a year-on-year basis.

Utility vehicles accounted for 36% of the company’s third-quarter domestic sales volume, compared with 24% in the year-ago period. The company has been benefitting from the premiumization trend as customers are increasingly going for variants with more features and automatic transmissions.

On the profitability front, the company saw its Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin, or operating profit margin, improve to 11.7% from 9.6% in the year-ago period, as per our calculations. EBITDA grew by almost 38% on year to Rs 3,907.9 crore.

Apart from higher volume and average selling price, margins were also driven by softening of commodity price inflation and a slight reduction in employee benefit expense, which offset the impact of higher sales promotional and advertisement expenses.

Material cost, which refers to the cost of materials used in the production of goods or the provision of services, as a percentage of net sales reduced to 74% from 75.7% in the year-ago period, the company said in a presentation.