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Maruti Suzuki India Ltd. exhibited a weak performance in Q1.
Negative operating leverage (400 basis points), commodity inflation (350 bps), and one-time expenses relating to Covid-19 dragged down Ebitda margin to 4.6% (down 367 bps QoQ).
Maruti Suzuki stated that overall new booking inflow/enquiries remains strong from mid-June onwards for both rural and urban market.
Moreover, low network inventory (less than four weeks) and strong order backlog (170,000 vehicle) to support wholesale volume in ensuing months.
Recovery in replacement demand with pick up in urban sales and positive growth in rural areas is underpinning strong demand for passenger vehicles.
Discount levels have come down and operating leverage will kick in from Q2 as production ramps up but commodity inflation pressures are keeping the margin trajectory vulnerable.
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