Mumbai: Maruti Suzuki, the country's top carmaker, said its fourth-quarter net profit more than doubled on strong sales, but missed forecasts as tough competition, higher raw material prices and costs associated with migrating to new emission norms and new launches hit margins.
Shares in Maruti, worth $ 8.8 billion, fell 1.1 percent in a Mumbai market that was up 0.3 percent.
Car sales in the country have been robust in 2010 with a revival in the economy bumping up demand, while availability of credit has brought back customer confidence.
But higher raw material prices, a rise in interest rates and hike in fuel prices threaten to spoil the party.
"The industry will continue to grow by 13-14 percent on continuing demand but I see Maruti stock underperforming in the short to medium term because there is nothing new happening and everything has been factored into its valuations," said Umesh Karne, analyst with Brics Securities.
"The market is also concerned about the increasing competition and how the company will tackle it," he said.
Maruti, which sells one of every two cars in India, is facing intense competition in the compact car segment from other global carmakers.
Data from Society of Indian Automobile Manufacturers showed that total industry car sales rose 28.4 percent in the March quarter from a year earlier.
Maruti, 54.2 percent owned by Japan's Suzuki Motor Corp, sold 287,422 cars in the March quarter up 22 percent from a year earlier.
Maruti reached its full capacity of 1 million cars in its fiscal year ended March and is adding capacity to produce 250,000 more cars annually from April 2012. It is also tweaking existing capacity to raise output by 80,000 this year to meet demand.
General Motors, whose India sales rose 130 percent in the March quarter, has revised its sales outlook for 2010 based on the success of its Chevy Beat minicar, which it launched in January.
Hyundai Motor Co is Maruti's closest competitor in the domestic segment with its popular i10 and i20 hatchbacks. Its car sales in India rose nearly 38 percent in the quarter.
Maruti reported net profit of 6.56 billion rupees ($ 148.1 million) for its fiscal fourth quarter ended March, compared with 2.43 billion a year earlier.
Net sales rose to 82.3 billion rupees from 63.1 billion a year ago.
A Reuters poll of 12 brokerages had estimated net profit at 7.33 billion rupees and net sales at 83.87 billion.
Maruti shares had fallen 9.2 percent in the March quarter, compared with a 0.4 percent rise in the main index.
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