Maruti Q2 Result Highlights: ICICI Securities decodes details | Pros and cons

ICICI Securities say Maruti Suzuki (MSIL) performance in Q2 FY21 came in largely on expected lines. ASPs (Average Selling Price ) for the quarter however, came in lower than anticipated at Rs 4.5 lakh per unit (down 6% QoQ) with lower depreciation as well as lower effective tax rate supporting PAT for the quarter.
 
Q2 FY21 Earnings Summary
 
Total operating income for the quarter stood at 18,475 cr, up 10.4% YoY (I-direct estimate: 19,327 cr). Average Selling Price (ASP) surprised negatively, coming in at 4.5 lakh per unit (down 5.6% YoY & 6.3% QoQ) vs. estimate of Rs 4.66 lakh per unit. This points to some element of down trading with customers preferring lower variant models within a similar vehicle category. Q2 FY21 volumes stood at 3.93 lakh units, up 16.2% YoY.  Of this, domestic volumes grew by 18.6% YoY to 3.7 lakh units while exports volumes declined by 13% YoY to 22,511 units.
 
EBITDA in Q2 FY21 stood at Rs 1,934 cr with corresponding EBITDA margins at 10.3% (I-direct estimates: Rs 1,995 cr, 10.3%). Savings were realised on raw material costs front, however the same was mitigated through higher other expenses in Q2 FY21.  Consequent PAT for the quarter stood at 1,372 cr, up 1% YoY (I-direct estimate: Rs 1,387 cr). PAT for the quarter was supported by lower than anticipated depreciation charge as well as lower effective tax rate (22%). On the Balance Sheet front, Maruti continues to remain a debt free company with CFO generation in first half of FY21 at Rs 2,100 cr and FCF generation at Rs 1,000 cr.
 
Key reasons for margin movement
 
Positive Factors
 
1)      Higher sales volumes leading to improved capacity utilization
2)      Lower sales promotion and advertisement expenses
3)      Lower operating expenses
4)      Cost reduction efforts
 
Negative Factors
 
1)      Adverse commodity prices
2)      Adverse Foreign Exchange fluctuation
3)      Lower fair value gains on invested surplus
 
Management said that In Q2, the performance improved on the back of some demand recovery and gradual improvement in supply conditions. Production across the Company’s factories and supply chain was progressively ramped up consistent with maximum efforts to ensure safety of the people.
 
The Company sold a total of 393,130 vehicles during the Q2, higher by 16.2% (YoY). Sales in the domestic market stood at 370,619 units, higher by 18.6%. Exports were at 22,511 units, lower by 12.7%.