SML Isuzu Limited
(SMLI), manufacturer of medium sized trucks and buses, reported weak set of numbers in Q2FY19. Revenue was up 30% yoy (down 35% qoq) at Rs295cr. Top-line was led by 28% yoy volume growth (30% qoq volume decline) and realization growth of 2% yoy (decline of 6% qoq). This was the worst sequential realization decline in eight quarters.
Higher raw material expenses (up 341bps yoy as % of sales and 155bps qoq) put pressure on gross profit margin. At 22.6%, this was the worst gross profit margin in more than 17 quarters. We believe that this was due to inability of SMLI to take price hike owing to high level of discounting prevailing in the CV space currently.
Operating and manufacturing expenses have been growing at a brisk pace over past two quarters (up 12% yoy in Q1FY19 and 11% yoy in Q2FY19). We believe this is due to expenses related to new launches and BS-VI implementation. Consequently, EBITDA plunged 68% yoy (96% qoq) to Rs1cr, while EBITDA margin went below 1%. SMLI slipped into net loss of Rs8cr due to high depreciation expenses.