Maruti Suzuki geared up for a record show

is on track to record its highest-ever fiscal year sales and profit, led by strong demand for its cars and benefits stemming from the depreciation of the Japanese yen and austere raw material costs.

The main boost will come from the currency advantage, which could add more than ₹1,500 crore to operating profit this fiscal year, according to an ETIG analysis, if exchange rates remain at current levels.

Analysts followed by Bloomberg expect on average that the Indian unit of Japan’s Suzuki Motor will report operating profit (Ebitda) of approximately ₹10,000 crore and net profit of ₹7,228 crore in fiscal 2023. Sales are expected to be around 1 lakh crore, up 28% from last year, which would be driven by projected production of more than 2 million vehicles.

Maruti Suzuki in top gear for a record show

According to ETIG analysis, the yen has depreciated by 16% against the US dollar since 2022, while the rupee has fallen 5% since then. So effectively, the rupee is up about 11% against the yen. In essence, Maruti Suzuki will have to pay less in Japanese currency for payments in yen – that is 16-17% of the total raw material cost. A 10% rise in the rupee against the yen would result in an operating profit increase of ₹1,000 crore for Maruti Suzuki. A 10% weakening of the yen against the rupee translates into a margin expansion of 160-170 basis points, with 16-17% of raw material costs being in Japanese currency. Adjusted for export earnings, the net addition to the operating margin would be 90-120 basis points.

An email sent to Maruti Suzuki on Sunday yielded no response.

The yen fell to its lowest point against the dollar in nearly 25 years on Friday. The yen has been the worst performing currency in the Asian region over the past three months. With the Bank of Japan intent on continuing to control the yield curve, the yen’s divergence from its global counterparts is likely to continue. This would mean that Maruti’s operating margins could be 80-100 basis points ahead of the consensus forecast for the year.

The projected operating profit margin for Maruti Suzuki is 9.2% and 11% for FY23 and FY24, respectively, according to Bloomberg estimates.

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