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Maruti Suzuki India has reported numbers for Q1FY22. Following are the highlights of the performance for the quarter:

Highlights from the Quarter (Q1FY22):

Maruti Suzuki reported net revenues of Rs. 17,776.4 cr for Q1FY22, down 26% on a QoQ basis due to the country-wide lockdown imposed due to the 2 nd wave of Covid19. The YoY figures aren’t comparable as Q1FY21 was washed out due to the worldwide pandemic last year. The company sold 3,53,614 vehicles during the quarter vs. 4,92,235 vehicles during the preceding quarter. The average sales realizations improved from Rs. 4.66 lakhs/unit for Q4FY21 to Rs. 4.75 lakhs/unit for Q1FY22 on account of price hikes taken during the quarter. Exports contributed 12.9% of total sales volumes for the quarter

EBITDA for the quarter stood at Rs. 818.9 cr, down 59% QoQ due to lower sales volumes causing lower capacity utilization. The increase in prices of commodities further pressured the margins. However, lower sales, advertising and promotion costs and price hikes taken on the vehicles helped manage the impact on margins. The company reported a consolidated net income of Rs. 475.0 cr for the quarter at a net margin of 2.7%, down 62% from Rs. 1,241.1 cr in the preceding quarter.

OUTLOOK AND VALUATION

The 2 nd wave of Covid-19 hit our country hard in April, causing most states to spiral back into strict lockdowns overnight. This affected the sales performance of most businesses like it did last year. Maruti Suzuki suffered the same fate, with demand dwindling due to the lockdown. With rise in input costs, low sales volumes and decreased capacity utilization, the margins were under pressure. To combat this, the company introduced price increases across its product range. Looking forward, we expect demand recovery to be swift as most states have unlocked and economic activity has resumed. With the prices of fuel touching record highs, we expect a shift towards CNG vehicles. Maruti Suzuki has the largest portfolio of CNG vehicles in the country, and is preparing more models with CNG variants. This should help the company improve its market share. We maintain our forecasts and keep our estimates unchanged for FY22E & FY23E. We maintain our target price of Rs. 9,553 (@32x FY23E EPS) which is an upside of ~37% from today’s closing price of Rs. 6,998. We maintain BUY on Maruti Suzuki over an invest horizon of 18-24 months.

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