Maruti Suzuki share/stock price falls over 12% on poor quarterly results-Latest stock price, stock tips by experts
The much awaited earnings of India's largest car company Maruti Suzuki India shocked the D-Street on Monday.
Despite strong double digit volumes growth the company posted a whopping 25 per cent drop in profits in their first quarter; the steep decline was due to sudden increase of royalty payout of Rs 188 crore to its Parent Suzuki Corp.
That’s why when markets opened, the shares of Maruti Suzuki India crashed more than 12 per cent with the stock hitting a 52 weeks low.
Similarly, shares fell 17.03 per cent to touch a year's low of Rs 1,126.85 on the National Stock Exchange.
Over the last year or so, Maruti Suzuki's royalty payout has increased from 3.5-5 per cent and sources say it is likely to remain at 5 per cent levels.
The operating margin for the first quarter came down by 160 basis points to 8.9 per cent and experts say the higher royalty will clearly reflect negatively on the margins in the forthcoming quarters.
The higher royalty payout was after the government removed a cap of 5 per cent in its regulation released on May 14.
This apart the company also has to manage rising raw material prices and a weaker Euro to protect its margins.
When contacted Maruti Suzuki declined to comment and surprisingly the company also did not organise the conference call which it usually does after every quarter earnings.
Analysts estimate the margins which is already under pressure will now see a further downside of 200 basis points.
Maruti Suzuki has already absorbed a large part of input cost pressure and has not increased prices significantly to keep its sales going.
Some experts say now with higher royalty pay out and ever increasing raw material prices, Maruti Suzuki will be compelled to pass on the price rise. Either way Maruti has a tough balancing act to manage in the coming days if it does volumes will be impacted and if it does not margins will degrade further thereby impacting the shareholders earnings.
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