Automobile companies see mixed results in Q4 on BS-III impact

Key highlights:

• The industry saw a slow recovery from the impact of demonetisation
• Bharat Stage III vehicle ban by the Supreme Court impacted net profits
• Two-wheelers see a big hit in Q4 results

The automobile industry seems to be having mixed results in the fourth quarter of FY17. While four wheeler companies seem to be positing growth in net profit, for two-wheeler companies it seem to be a bad quarter.

The industry saw a slow recovery from the impact of demonetisation to be suddenly be hit by another catastrophe, ie the Bharat Stage III vehicle ban by the Supreme Court.

However, there certain segments in the automobile industry industry which were able to power through this. The passenger cars segment especially was largely unhurt by this decision. However, the two-wheeler segment saw a major impact on their revenues for the quarter.

Maruti Suzuki reported nearly 16% year-on-year rise in its net profit for the fourth quarter ended March 31, 2017 result. The company reported net profit of Rs 1,709 crore in Q4, rising by 15.77% compared to Rs 1,476.2 crore in the corresponding period of the previous year.

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It's total income stood at Rs 21,196.10 crore, witnessing growth of 19.24% year-on-year (YoY) and 7.11% quarter-on-quarter (QoQ) basis.

The four-wheeler companies such as Mahindra & Mahindra, Tata Motors and Ashok Leyland have yet to reveal their results for the quarter. However, their results could see an impact of the BS-III ban was largely seen on the commercial vehicles (CV) segment of these three companies.

Tata Motors, Ashok Leyland and Mahindra & Mahindra had BS III inventory worth Rs 5,076 crore still unsold after April 1.

ALSO READ: Tata Motor, Ashok Leyland, Mahindra left with over Rs 5,000 crore of unsold BS III vehicles

Eicher Motors, however, posted a large 34% growth in net profit. It's net profit rose to Rs 459.44 crore in Q4 FY17 from Rs 343.10 crore in the same quarter last year.

However, the large rise in Eicher Motors was largely due to the high sales of Royal Enfield during the quarter. Quarter after quarter the sales of Royal Enfield saw a significant increase.

In January Royal Enfield posted a 25% growth in sales, followed by a 19% growth in February and 17% growth in sales in March.

Two of the largest two-wheeler companies in India, Hero MotoCorp and Bajaj Auto, saw a large decline in profit during Q4. TVS Motor too posted a decline in net profit during the quarter.

Hero MotoCorp's net profit plummeted by 14% in Q4 as it stood at Rs 717.75 crore from Rs 833.29 crore in the same quarter last year.

This large decline in net profit of the company was attributed to the huge discounts after the BS-III verdict of the Supreme Court on the ban of the vehicles. It's net sales declined by 7.6% to Rs 7,606.31 crore from Rs 8,227.93 crore.

Similarly, Bajaj Auto reported a 15% drop in net profit in Q4. The company reported a net profit of Rs 802 crore during the quarter from Rs 949 crore in the same quarter a year back.

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The company said that this was due to demonetisation of high currency notes during November and the recent BS-III vehicle ban that impacted its revenues during the quarter.

TVS Motor reported a 6.80% decline in net profit during the quarter. It's net profit declined to Rs 126.77 crore in Q4 from Rs 136.03 crore in the corresponding quarter last year.

It's motorcycle sales declined to 2.15 lakh units as against 2.47 lakh units registered in the fourth quarter.

The automobile sector could however see a full recovery only by Q2 FY18 on the basis of an economy economy recovery and pent up demand. Also, normal monsoon season expectations are expected to push sales.

“We expect volume recovery in Q2FY18 and strong bounce back in H2FY18 amid economic recovery and pent up demand. Healthy agri output and better rural economy would keep cushioning the volume over next few months,” said automobile analyst Mitun Shah of Karvy Broking.