Maruti up on good May sales

Tue, 1 Jun 01:30 pm

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The Indian markets began drifting deeper in the red as selling activity intensified during the previous two hours of trade. Currently, selling pressure is being witnessed in stocks across sectors led by stocks from the oil & gas, metal and banking spaces. On the other hand, healthcare and FMCG spaces are amongst the top performers at the moment.

The BSE-Sensex is trading lower by 310 points, while NSE-Nifty is trading lower by 90 points. The BSE-Midcap index is trading lower by 0.9% while the BSE-Smallcap index is trading down by 0.5%. The rupee is trading at 46.95 to the US dollar.

Engineering stocks are currently trading weak led by Siemens, Praj Industries and Blue Star. Wind energy equipment manufacturer Suzlon Energy announced its results recently. The company reported a consolidated topline of about Rs 206 bn, which is lower by about 21% YoY as compared to FY09. Revenues of the company’s two key businesses - wind turbine generators and gear box sales decline by 21% YoY and 34% YoY. It must be noted that during the year, the company sold its stake in its erstwhile subsidiary Hansen Transmissions International NV ("Hansen"). As such, the gear box sales are not fully comparable. However, the wind turbine generator business contributed to the majority of revenues, (about 87% during FY10). At the operating level, the company took a major beating in margins as operating profits declined by 70% YoY during the year. The key reason behind the same was the decline in sales leading to the proportion of fixed costs rising (as a percentage of sales). The company recorded a loss at the profit level during the year. Lower other income and much higher interest costs were the key reasons for the same.

During the quarter ended March 2010, the company’s sales declined by 33% YoY, while operating profits declined by 38% YoY. At the bottomline level, the company reported a loss of Rs 1.9 bn.

Auto stocks are currently trading weak led by TVS Motor, Tata Motors and Bajaj Auto. The stock of passenger car major Maruti Suzuki is currently the top gainer amongst stocks forming part of the BSE-Sensex. Gains in the stocks are on the back of the company declaring strong sales volumes for the month of May 2010 today. The company sold a total of 102,175 units, higher by about 28% YoY as compared to the corresponding month last year. Domestic volumes, which formed nearly 88% of total volumes, saw an increase of 27% YoY. Domestic volumes stood at over 90,000 units, the highest ever domestic sales in a month. Exports on the other hand, increased by about 34% YoY. The company’s A2 segment (includes Alto, Wagon-R, Estilo, Swift, Ritz and A Star), which contributed to nearly 70% of domestic volumes saw a relatively slower growth of 17% YoY. In the year till date, during the current fiscal year, overall sales volumes stood at over 195,000 units, higher by 29% on a year on year basis. Domestic sales formed around 87% of the total volumes during the period and grew by 25% YoY. Exports on the other hand grew by 58% YoY. While the company has been reporting strong export sales numbers in the year so far, a part of it could also be attributed to a low base effect.