Maruti Suzuki Q2 preview: Revenue, net profit likely to take a hit amid demand slowdown; check details

Experts believe that a slowdown in car sales in India and taxation changes introduced in the Union Budget 2024 will likely affect the revenue and profit of the country’s largest car producer during the second quarter.

The company’s net profit is expected anywhere between ₹3,650 to ₹4,029 crore in Q2FY25, rising by 6 to 10% compared to the same quarter of FY24.

Meanwhile, revenue is expected in the range of ₹36,865 crore to ₹37,424 crore, translating into a potential 3-5% year-on-year growth.

Sales impact

Maruti Suzuki reported a decline in sales for two of the three months of the second quarter of the current fiscal year. The impact of lower sales is likely to show in the Q2FY25 earnings. In July, passenger vehicle sales declined 9.6% year-on-year to 13.74 lakh units.

In August, sales had fallen 3.9% compared to a year ago to 1,81,782 units. However, in September, sales rose marginally by 1.87% to 1,84,727 units.

Tax changes

In August, Maruti Suzuki had said that a one-time impact on profit after tax will be felt in the second quarter of the ongoing financial year.

The company would need to increase the provision for deferred tax liability by around ₹850 crore due to the withdrawal of the indexation benefit when calculating long-term capital gains on debt mutual funds.

“Due to withdrawal of indexation benefit and change in rate of tax from 20% plus surcharge and cess (with indexation) to 12.5% plus surcharge and cess (without indexation), accounting provision for deferred tax liability so created needs to be restated,” the company said.

It added that the Finance (No.2) Act 2024 has withdrawn the indexation benefit from calculating long-term capital gains on debt mutual funds purchased prior to April 1, 2023.

Previous quarter performance

For the quarter ended June 2024 (Q1FY25), Maruti Suzuki had posted a healthy 46.9% year-on-year increase in standalone profit to ₹3,650 crore, exceeding market estimates.

Revenue during the quarter had increased 10% to ₹35,531 crore compared with the year-ago period. Earnings before interest, tax, depreciation, and amortisation (EBITDA) rose 49.1% year-on-year to ₹4,448.3 crore due to cost reduction and favourable currency movement.

EBITDA margin for the quarter increased by nearly 350 basis points to 12.5% in Q1FY25 compared with 9.2% in Q1FY24. The company sold 521,868 vehicles in Q1FY25, a 4.8% increase from the same period last year.

Key metrics to watch out for

Investors will be keeping a close watch on the company’s demand outlook for different four-wheeler segments for the coming quarter as it announces its Q2FY25 results. Announcements on new car launches, especially in the electric vehicle segment, would also be in focus.

Maruti Suzuki share price

Maruti Suzuki stock was trading flat at ₹ 11,529 apiece, up 0.23%, on the NSE at 2:00 pm on October 28, a day before the earnings announcement. However, the leading auto stock has lost 5% in the past five trading sessions and 13% in the past one month. Year-to-date, the stock has rallied 12%.