Maruti Suzuki July Sales Crash 34% to Two-Year Low

The only segment that registered a half a percent growth was light commercial vehicle, under which it sells Super Carry.

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Maruti Suzuki India's country's largest passenger vehicle maker, disappointed the analysts on August 1 by reporting sharp fall in July sales.

Company sold 1.09 lakh units in July 2019, the lowest in last two-year, down by 33.5 percent compared to 1.64 lakh units sold in the same period, previous year.

Numbers were lower than Nomura expectation of 1.17 lakh units for the month.

Maruti said domestic sales in July 2019 were down 35.1 percent at 1 lakh units and passenger car sales fell 36.2 percent to 71,486 units compared to July 2018.

Total exports also declined 9.4 percent year-on-year to 9,258 units in the month gone by.

Maruti saw weak demand across segments with mini (Alto, Old WagonR) category showing a 69.3 percent fall YoY, and compact category (New WagonR, Ignis, Baleno, Swift) reporting a 23 percent decline YoY in July 2019.

However, the only segment that registered a half a percent growth was light commercial vehicle, under which it sells Super Carry.

The stock was quoting at Rs 5,475.00, up Rs 2.85, or 0.05 percent on the BSE at 1052 hours IST.

The Maruti stock has been under pressure so far in 2019, having fallen more than 20 percent so far in the year, and nearly 40 percent in the last 12 months.

After subdued June quarter earnings last week, analysts had trimmed their earnings estimates for Maruti, but feel that it is still a strong bet for the long term, and that investors can look at buying on dips.

Here's what brokerage said about company after June quarter earnings:

Most brokerage firms retained their rating on the stock with Goldman Sachs maintaining buy rating with a target price of Rs 7,210.

The June quarter results were also above estimates on cost control and investors could look at buying the stocks on weakness, said Goldman which is of the view that EBITDA margin seems to have bottomed out, and it expects better volumes hereon.

The global investment bank trimmed its FY20-21 earnings forecast for Maruti by 7-4 percent, largely on account of higher depreciation. The automaker remains the best-positioned stock going into BS-VI transition, it felt.

India’s largest carmaker reported a 27.3 percent year-on-year (YoY) decline in standalone profit to Rs 1,435.5 cr, despite a three-fold jump in other income. The profit was largely dragged by lower sales volumes and higher depreciation expenses.

The operating performance remained subdued. Earnings before interest, tax, depreciation, and amortisation (EBITDA) saw negative growth of 38.9 per cent to Rs 2,048 crore and margin contracted 450bps to 10.4 per cent compared to the year-ago quarter.

CLSA also maintained its buy rating with a target of Rs 7,400 in the wake of the June quarter results. The global investment bank is of the view that Maruti is better placed to play the potential demand recovery.

Citigroup also retained its buy rating on Maruti Suzuki post June quarter results with a target of Rs 7,400. The global investment bank feels that the automaker is well-positioned to navigate through changes in emission norms.

However, UBS thinks otherwise. It maintained its sell rating on Maruti with a target price of Rs 5,800. The June quarter missed UBS estimates amid a tough environment. EBITDA was below consensus. The volume outlook remains weak with sharp decline in both rural and urban markets, the UBS note said.