Maruti Suzuki Q1 margins slightly lower than expected: Naveen Kulkarni

economictimes.indiatimes.com:

Naveen Kulkarni, CIO, Axis Securities, says “there probably is still hope that Maruti Suzuki margin should improve because the commodity prices are low and production numbers are looking up. More importantly, premiumisation trends have been there in the segment. So, overall it should be fine in that way.

But we will have to wait and watch how things pan out.”What is your first cut on Maruti Suzuki numbers? The margins have been a disappointment at 9.2%. How do you see that? Yes, I would say the margins are slightly lower than what we were expecting. So not very encouraged by these sets of numbers as of now.

We will have to see if there are any one-offs or anything that we are not able to spot right now.Coming to the outlook for times ahead because what we are given to understand is that auto sales are experiencing a tepid growth momentum in the small car segment, the company is actually trying to push the small car segment sales with higher discounts. Going ahead, are you hopeful that the sales or the margin figure will catch up or they may remain at these levels?Margin profile is of course dependent on two aspects. One is the commodity prices.

The commodity prices typically get negotiated on a three-month or a six-month basis. Right now, the commodity prices are not very high and probably they will get reflected in the forthcoming quarters. We have to see what exactly is the gross margin and then we will have to look at how things are panning out.

So, as of now, there probably is still hope that the margin should improve because the commodity prices are low and production numbers are looking up. More importantly, premiumisation trends have been there in the segment. So, overall it should be fine in that way.