January 28, 2019

Has Maruti Suzuki lost track or is it the whole car industry?

Investors were jolted out of their seats on Friday after Maruti Suzuki India Ltd reported a sharp narrowing of operating profit margin to under 10%. The company’s flagging sales volume data had given the impression that the company has hit a rough patch, but with margins also dropping sharply, it now looks like it will be a rocky road to recovery.

The close to 600 basis points drop in margins came without warning, prompting analysts at Jefferies India Pvt. Ltd to call their report on the company’s results, “Unexpected slowdowns are the worst".

Maruti Suzuki shares fell more than 8% on Friday and hit a 52-week low. Note that some analysts have downgraded earnings estimates by as much as 8-10% each year for the next three fiscal years. A moot question is if this spells gloom for the country’s auto industry too.

Read more at https://www.livemint.com/market/mark-to-market/has-maruti-suzuki-lost-track-or-is-it-the-whole-car-industry-1548608176019.html

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