Maruti Suzuki fourth quarter results

You are right that Maruti has reported a 5% fall in profits in the fourth quarter to Rs.1796 crore due to a combination of higher commodity prices combined with foreign exchange losses during the quarter. Also the cost reduction efforts of Maruti were offset by higher depreciation charges and higher marketing expenses incurred by the firm. Top line in the fourth quarter grew by just 1.4% to Rs.21,459 crore showing clear pressure on vehicle off take among the retail space. Even if you look at the number of vehicles sold in the quarter, it was absolutely flat. The big pressure point was in the EBITDA which fell by 25% on a YOY basis and EBITDA margins contracted by 370 bps to just 10.55%.

Should Maruti Suzuki be bought at current prices?

The stock has already lost about 35% from the peak levels and the stock is currently hovering close to its lows. While bounce backs from lower levels are to be expected, the overall economics of the auto industry will remain under pressure due to weak auto demand growth and pressure on margins. Also the decision by Maruti in its latest board meeting to phase out diesel cars altogether is going to be disruptive in the short term. We suggest a trading approach to Maruti where lower levels can be used to trade the range. Investment view is not recommended for now.