Maruti Suzuki's vehicle sales fall

Maruti's petrol-engine-run cars accounted for an estimated 72 per cent of its total vehicle car sales during FY11, according to domestic brokerage house reports.

Analysts point out that the sluggish demand for petrol-run engines is owing to current retail petrol prices being nearly Rs. 24-25 per litre higher than that of diesel. The Maruti stock lost 0.7 per cent to Rs 962 and it is hovering just above its 52-week low which it touched on November 18.

However, Maruti is expected to see its supply of diesel engine improve from about 20,000 units per month currently to 25,000 units by January 2012, and that should help improve its vehicle sales volume in the months ahead. Also, the company has received bookings for nearly 100,000 units of its recently-launched new Swift model, which should also help revive sales numbers, in the medium term.

Media reports indicate that the company may raise prices in the new calendar year, although details are not available. And while global non-ferrous and steel product prices have shown signs of easing, local automobile players have been adversely impacted by the near 17% depreciation of the rupee since the beginning of August.

Earlier, the company's operating profit margin declined 420 basis points y-o-y to 6.3% in the second quarter of FY12. The company's vehicle sales also fell 53.3% y-o-y in October, given the impact of the recent strike at its facilities. And sluggish output at the largest passenger car player Maruti resulted in total domestic industry passenger car sales in October 2011 decline 20.3 per cent y-o-y.

As analysts have pointed out, Maruti compensates its vendors for forex losses on the Yen, related to meeting its critical components and allied needs from imported sources, with a one-quarter lag. As a result, vendor related losses on the Yen for the September 2011 quarter are expected to weigh on the company's December 2011 quarter result.

In a bid, to deal with a rising Yen, the company has also focused on enhancing its indigenisation levels over the next few years, coupled with its internal cost control measures. Maruti Suzuki trades at a P/E of nearly 13.8 times on a trailing fourquarter basis.