M&M Q1 Results: Strong Revenue Growth, Profit Takes a Hit

Maruti Suzuki India Limited (MSIL), the country’s largest carmaker, reported its Q1 FY24 results on July 25, 2023, unveiling a mixed bag of performance. While revenue surged by 12%, the company’s standalone net profit took a 5% dip year-on-year.

Key Highlights:

• Standalone net profit: Rs 2,613 crore, down 5% YoY.

• Revenue: Rs 35,053 crore, up 12% YoY.

• EBITDA: Rs 4,404 crore, up 1.9% YoY.

• EBITDA margin: 12.6%, down from 13.3% in Q1 FY23.

What’s driving the performance?

Rising sales and a strong market position: M&M’s revenue growth can be attributed to strong demand for its vehicles across segments, especially in the utility vehicle (UV) space. The company continues to hold a dominant position in the Indian UV market, with its models like the Scorpio, Thar, and XUV700 gaining significant traction.

Increased input costs and supply chain disruptions: The decline in net profit reflects the challenges faced by the auto industry due to rising input costs, primarily for raw materials like steel and semiconductors. Supply chain disruptions also played a role in impacting production and profitability.

Competitive pressures: The Indian auto market is witnessing intense competition, with other players like Hyundai, Kia, and Tata Motors also vying for market share. This competitive environment is putting pressure on margins and forcing companies to adopt aggressive pricing strategies.

Detailed Analysis:

Revenue growth driven by UVs: M&M’s revenue growth was primarily driven by its UV segment, which witnessed strong demand. The company’s focus on new product launches like the Scorpio N and XUV700 has paid off, attracting a large customer base.

Profitability impacted by rising costs: The decline in net profit can be attributed to rising input costs, particularly for steel and semiconductors. Despite price hikes implemented by M&M, the impact of these rising costs on margins was significant.

Supply chain challenges persist: The auto industry continues to grapple with supply chain disruptions, particularly for semiconductor chips. This has impacted production levels and led to delays in deliveries, impacting profitability.

M&M’s outlook remains positive: Despite the challenges in Q1, M&M remains optimistic about its future prospects. The company is committed to addressing the rising input costs and supply chain disruptions, while also focusing on expanding its product portfolio and strengthening its market position.

Key takeaways for investors:

• Strong revenue growth: M&M’s revenue growth is a positive sign, indicating strong demand for its vehicles.

• Profitability challenges: The decline in net profit highlights the impact of rising input costs and supply chain disruptions on the auto industry.

• Focus on UV segment: M&M’s focus on the UV segment, which is growing rapidly, is a strategic move that can drive future growth.

• Investment opportunity: M&M remains a strong player in the Indian auto market, with a strong brand and product portfolio. Investors looking for exposure to the growing Indian auto industry may consider M&M as a potential investment opportunity.

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Conclusion:

M&M’s Q1 FY24 results reveal a mixed picture, with strong revenue growth offset by declining profitability. The company is facing challenges due to rising input costs, supply chain disruptions, and intense competition. However, its strong market position and focus on the growing UV segment position it for future growth. Investors should keep a close eye on how M&M navigates these challenges and its efforts to maintain its profitability in the coming quarters.