Maruti and its global peers have come under pressure as prices of commodities, from steel to copper, have risen. Maruti has tried to preserve its margins by passing on the costs to its customers, raising vehicle prices thrice this year.
Still, its earnings before interest, taxes, depreciation, and amortization margin, a key measure of profitability, of 4.6% for the first quarter came in below analysts' estimates of 5.7%, according to Refinitiv IBES data.
"Commodity prices have increased from the last quarter and remain elevated even in the second quarter, which will keep (Maruti's) margins under pressure," brokerage Systematix said in a note.
"We see limited scope for margin improvement over the next 12 months and expect the new product cycle to kick in only from financial year 2023."
However, with people preferring personal transportation during the pandemic, the New Delhi-based company's quarterly unit sales rose nearly five-fold to 353,614 vehicles.
That helped it post a profit of 4.41 billion rupees ($59.28 million) for the three months to June 30, compared with a loss of 2.49 billion rupees a year earlier, when a nationwide COVID-19 lockdown brought economic activity to a virtual standstill.
Total revenue from operations rose four-fold to 177.71 billion rupees.
While all parameters were substantially better this quarter, a comparison is not meaningful because last year had a much higher degree of disruption due to the pandemic, Maruti said https://www.bseindia.com/xml-data/corpfiling/AttachLive/7d733917-9c05-4abb-9974-fcce881bc607.pdf.
Sequentially, its sales were 28.2% lower as the second wave of COVID-19 infections hampered business in the June quarter.
Maruti's shares, which have fallen nearly 9% so far this year, saw their biggest intra-day percentage drop since April 19 on Thursday.
($1 = 74.3900 Indian rupees)
(Reporting by Chandini Monnappa, Nallur Sethuraman in Bengaluru and Aditi Shah in New Delhi; editing by Aditya Soni and Vinay Dwivedi)
By Chandini Monnappa and Aditi Shah