Maruti Suzuki India (MSIL) 1QFY22 performance was weak in a tough quarter marked with impact of lockdown on volumes and commodity cost inflation. While commodity inflation will persist in 2Q, there are drivers in place for sustained volume and margin recovery from 2HFY22E, said Motilal Oswal Institutional Equities in its research report.

EBITDA margin declined by 370bp QoQ to 4.7% (v/s our estimate of 5.2%), impacted by cost inflation (net impact of 90bp QoQ), higher staff costs (+18%QoQ/+46%YoY) and operating deleverage impact.There is recovery seen in both urban and rural. Inquiries are similar as 4QFY21 and bookings are at 80-85% of 4QFY21. Inquiries are at 120% of Jun-21 and retails similar to Jun-21. Wholesales and retails in Jul-21 should be higher than Jun-21.

"We lower our FY22E/FY23E EPS by 13%/3% to factor in further cost inflation in 2Q, higher staff cost and lower other income. Maintain Buy," the broking firm added. 

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