Maruti Udyog fell short of forecasts with a 48% jump in quarterly profit, but sales got an unexpectedly large lift amid robust economic growth and low interest rates, Reuters reported.
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Analysts told the news agency Maruti’s outlook was robust for this business year as car demand would remain buoyant, though a cut-throat market would push up spending on advertising and sales promotion.
Maruti net profit rose to 1.84 billion rupees ($US40 million) in the fiscal second quarter to September 30, compared with 1.24 billion a year ago and a median forecast of 1.96 billion in a Reuters poll of 12 brokerage forecasts.
But net sales, including from services, rose 25% to 27.12 billion rupees from 21.64 billion a year ago, topping a net revenue forecast for 24.89 billion. Other income dropped 31% to 781.4 million rupees.
“Things will only improve from here and volume growth will be good,” Kalpesh Parekh, an analyst at brokerage ASK Raymond James, told Reuters. “They have said they will increase production of the Alto, although sales promotion costs and marketing spends would rise.”
Reuters noted that car demand in India should be robust this decade due to poor public transport and an ownership level of just 8 cars per 1,000 people, against 35 in Thailand and 450 in developed countries.
Vehicle sales at Maruti, responsible for 44% of the industry’s output, rose 19.7% last quarter to 129,848, the report added.
“We expect 18% volume growth in the full year. People are upgrading from motorbikes to cars and (bank) interest rates haven’t risen, as was feared,” Dipen Sanghavi, analyst at brokerage Pranav Securities, told Reuters.
The news agency noted that Maruti will launch a 1.3-litre premium hatchback in the new year beginning in April, in a bid to boost its share of the fast-growing compact segment, where it will compete the Hyundai Getz and Fiat Palio, and also hopes to launch a diesel car by 2007.
Operating profit margin, a key efficiency gauge, remained unchanged from the previous quarter at 12.1%, despite a sharp increase in steel prices as employee costs dropped, Reuters added.
