In the March 2015 quarter, Maruti Suzuki’s top-line growth was supported both by a 7 per cent growth in volumes and a 5 per cent increase in average realisations year-on-year.

A richer product mix from the addition of the Celerio and Ciaz to the portfolio this year has helped improve realisations.

Several factors have also favoured the company at the operating level, taking operating margins to 15.8 per cent vis-à-vis 10.4 per cent a year ago. Benign commodity costs along with the depreciation of the yen against the rupee this period has helped soften raw material costs.

The company imports about 15-20 per cent of its raw material requirements, predominantly from Japan.

Raw materials as a percentage of sales stood only at 70 per cent this quarter against 74 per cent a year ago.

The company has also indicated lower promotional expenses in the quarter.

Higher demand, coupled with incremental volumes from new launches such as the Ciaz and Celerio (on which discounts are not available) could have been the reason for the same.

In the December 2014 quarter, average discounts stood at a high of ₹21000. These tailwinds resulted in robust net profit growth, despite a doubling of interest costs and a 77 per cent rise in tax expenses.

Outlook

With domestic automobile sales on a cyclical recovery path, Maruti Suzuki will be a beneficiary of this upturn.

Lower inflation and the beginning of interest rate cuts will also help quicken the volume growth for the industry this year. Maruti has also been able to take on competition and improve its market share in 2014-15.

After dipping to below 40 per cent in 2011-12 and 2012-13, its market share inched back to 42 per cent in 2013-14 and is at 45 per cent for the latest fiscal ended March 2015.

The company is also shedding the ‘small car’ maker image, with launches such as the Ciaz sedan and upcoming SUV launches such as the XA Alpha/Vitara, the SX4 S - Cross and the Celerio Diesel.

A richer product mix as a result of this will further impact realisations and operating margins positively, as these vehicles have higher price points than small cars.

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