Why Maruti Suzuki Shares Are Down Today Even As Profits Surged 145% In Q1

Maruti Suzuki shares were on the dip on Tuesday morning despite doubling its net profit during the first quarter of the 2024 financial year.

Maruti Suzuki Q1 Performance: In the June quarter, Maruti Suzuki India, the country’s leading passenger car manufacturer, saw a 145% surge in standalone net profit to ₹2,485.1 crore, up from ₹1,012.8 crore the previous year.

The growth came from higher sales volume, improved realization, cost-cutting efforts, and increased non-operating income. Despite this, net profit fell sequentially from ₹2,623.6 crore in the March quarter.

The company reported a 22% year-on-year rise in standalone Q1FY24 revenue to ₹32,326.9 crore.

Vehicle sales grew 6.4% compared to the same period the previous year, despite an electronic component shortage that led to over 28,000 unproduced vehicles. The company also plans to acquire Suzuki Motor Gujarat Pvt Ltd to boost its production capacity.

Maruti Suzuki Analysts View: Analysts believe Maruti Suzuki India Ltd.’s decision to fully acquire Suzuki Motor Gujarat will reduce its earnings per share (EPS) estimates and return ratios. The transaction, due before March 31, 2024, won’t affect operational performance but will entail a cash outflow of ₹423 per share, according to Nomura.

Motilal Oswal anticipates improved production efficiency but a 4%-5% EPS cut and a 90 basis point drop in Return on Capital Employed due to the cash payout. CLSA predicts an EPS dilution of 5.7% and a 90 basis point drop in Return on Equity if the deal is cash-based.

Price Action: Maruti Suzuki India shares were trading 0.97% lower at ₹9,724.85 shortly after markets opened for trading on Tuesday.

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