Breaking News
0

What is Wrong With Maruti Suzuki and What it Needs to Do?

in.investing.com/analysis/what-is-wrong-with-maruti-suzuki-and-what-it-needs-to-do-200207412
What is Wrong With Maruti Suzuki and What it Needs to Do?
By Puneet Sikka/Investing.com   |  Jan 30, 2019 13:18
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Maruti Suzuki India Ltd, India’s largest passenger vehicles maker reported its December ending earnings last Friday. The results disappointed investors as the company’s net profit declined by more than 17% on a year-over-year basis. This decline was even worse than a 10% decline in profits that the company suffered in the September ending quarter last year. This shows that all is not well with the company. Maruti’s stock experienced a free fall of 8% after the company’s announcement of results last week.

Maruti’s operating margins came at 9.8% in the last quarter, which was the lowest in the previous five years. Some of the factors that lead to a decline in profits were higher commodity prices, unfavourable currency rates and abnormally high level of discounts offering to attract customers. Rising fuel prices in the last quarter also didn’t help the cause. Besides, Maruti’s exports in the previous quarter declined by 8.5% due to lower demand and stronger US dollar against most of the currencies. Growing competition from Honda, Mahindra and Tata Motors is also impacting the company.

Maruti Suzuki 6 Month Chart
Maruti Suzuki 6 Month Chart

Not everything is lost for Maruti, however, the company still dominates the car segment and has more than a 50% share in this market. Maruti is now also looking to address the issues that impacted it in the last quarter. The company is looking to get rid of the discounts that it had to offer in the previous quarter. It provided an average discount of Rs 24,300 per model, which was 75% higher than the average of Rs 13,900 discount is offered in the year-ago quarter. The company has now realized that discounts are not an ideal way of selling cars as it changes customer behaviour and they expect even higher discounts in the coming days.

To counter competition, Maruti has recently launched a few more car variants. It launched new Ertiga in October last year; a new model of WagonR a few days back and more recently it launched new Baleno. In addition to these, Maruti’s new Swift, Swift Dzire and Ciaz models are also doing well.

Despite some of the positives, I still expect Maruti to experience headwinds in the short-term mainly due to the slowdown in the overall auto sector in India. Higher insurance costs, stiff interest rates, and a liquidity crunch are some of the factors that are weighing on this sector. However, the long-term fundamentals for Maruti look good.

What is Wrong With Maruti Suzuki and What it Needs to Do?
 
What is Wrong With Maruti Suzuki and What it Needs to Do?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email