Bloomberg News

Maruti Climbs to Five-Month High as CFO Says ‘Worst’ Is Over

January 23, 2012

Jan. 23 (Bloomberg) -- Maruti Suzuki India Ltd. climbed to the highest level in five months after its chief financial officer said the worst was over and that new cars and increased supply of diesel engines would help boost sales next year.

Shares of India’s biggest carmaker climbed 5.2 percent to 1,160.65 rupees at close in Mumbai, the highest since Aug. 22. The stock was the best performer on the BSE India Sensitive Index, which rose 0.1 percent. Maruti has risen 26 percent this year, compared with an 8.4 percent gain for the Sensex.

“We believe that we have seen the worst till now and should improve from here,” Ajay Seth, Maruti’s chief financial officer, said on a conference call today. “The company is striving into the next year with a strong product line-up, plans for new model launches, higher availability of diesel engines and more output from factory production.”

Maruti, which plans to begin selling the Ertiga van from April and a new version of its DZire sedan starting next month, today reported profit that missed analysts’ estimates after a strike by workers and lower demand for its models damped sales. The New Delhi-based company also reached an agreement with Fiat SpA’s Indian unit for the annual supply of 100,000 diesel engines, which will help Maruti pare the waiting list on models such as the Swift hatchback.

“Going forward, with the additional supply of diesel engines from Fiat, and the new Ertiga and DZire coming on sale, things may get better for Maruti in the next financial year,” said Basudeb Banerjee, an analyst with Quant Broking Pvt. in Mumbai. “A few bad things combined together for Maruti in the quarter, including the labor trouble and the slowdown in the industry.”

Smallest Profit

Record gasoline prices are driving consumers to opt for cheaper, subsidized diesel.

Net income at Suzuki Motor Corp.’s Indian unit fell 64 percent to 2.06 billion rupees ($41 million) in the three months ended Dec. 31, from 5.65 billion rupees a year earlier, Maruti said in a statement today. The profit is the smallest since the quarter ended September 2004 and missed the 2.17 billion-rupee median of 32 analyst estimates compiled by Bloomberg.

Still, third-quarter sales of 76.6 billion rupees beat the 74.9 billion-rupee median of 35 analysts’ estimates after the company cut discounts from the preceding period.

“This was the worst ever quarter,” said Surjit Singh Arora, an analyst at Prabhudas Lilladher Pvt. in Mumbai, who rates the stock “accumulate.” “Incrementally, things will get better for Maruti.”

Suzuki Motor owns 54 percent of Maruti.

--Editors: Suresh Seshadri, Abhay Singh

To contact the reporter on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net.

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net.


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