Labour Unrest Lends Backhand Drive To Maruti’s Q3FY13 Performance

Maruti Suzuki (MSIL) announced its Q3FY13 results earlier today, on the back of which its stock prices appreciated to levels of over Rs 1600 per share, rising by over 4%. This quarter was particularly good for MSIL, considering the fact that an episode of labour unrest had left it without production for 14 days in Oct 2011, leading to lower sales in Q3FY12. Thus, a low base effect was seen in Q3FY13, which helped the company show good volumes growth and financials.

Moreover, there was a month-long lockdown at MSIL’s Manesar plant in Jul-Aug 2012. Production was severely hampered during the time, and the company had to make secular changes, which pushed production returning to normal levels to Oct 2012. While supply was hampered, MSIL continued taking orders, thus leading to a strongly built-up order book.

A cumulative of the above factors resulted in healthy volumes in Q3FY13. In the quarter under review, MSIL sold a total of 301453 vehicles. This is 25.85% higher than the sales volumes in Q3FY12, wherein the company sold 239528 vehicles. Moreover, sales were pushed upwards by the success of Ertiga, a Utility Vehicle (UV) launched by MSIL. Capturing on the uptrend seen in UV sales over the last few quarters, the model made for a good addition to MSIL’s product portfolio.

The effect of all these factors is clearly reflected in MSIL’s Q3FY13 financials, where it registered YoY net sales growth of 45.6% to Rs 10957 crore. As a result of higher volumes, a favourable model mix and enhanced export realisations, the company saw a massive improvement in margins as compared to those in the previous year corresponding quarter. The EBITDA margins jumped from 5.36% in Q3FY12 to 8.13% in Q3FY13. Similarly, the net profit margin shot up from 2.73% in Q3FY12 to 4.58% in Q3FY13.

In sum, we see that the total volumes for the quarter have been boosted due to the Oct 2012 sales because of the lower base it worked on and the higher sales seen in Nov 2012 because of a built-up order book. In Dec, the volumes grew by a mere 3.24%, reflecting the overall moderate growth seen in the automobile industry. Going ahead, we expect this moderation to continue in the near-term. At the same time, we maintain our bullish stance on the performance of MSIL.