Overall volumes in the sector logged a significant growth in the quarter ended March 2024 led by revival in 2W demand and increased Electric two wheelers (E2W) volumes ahead of the subsidy reduction as well as sustained premiumisation in the passenger vehicle segment. Also, the favourable raw material inflation will offer a boost to the sector’s earnings during Q4.

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Here are the key pointers to visualise in Auto Q4 results:

Auto volume growth:

On this, JM Financial said of its coverage companies, auto volumes grew in healthy double-digits on year during the review period. InCred Equities also said that industry dispatches volume growth improved for PVs as well as 2W, nonetheless it registered a decline for CVs as well as tractors. 

“The year-on-year volume growth was led by Bajaj Auto, TVS Motor and Maruti Suzuki for the Mar 2024 quarter while the laggards were Escorts Kubota and Ashok Leyland (ALL), noted Incred.

Commodity costs to increase from its low:

Commodities prices logged a mixed trend as steel and lead prices eased on a sequential and annual basis, while the rest of the commodities logged gains. And now going ahead, rubber and copper prices which have logged significant rise of up 10 per cent sequentially will be a cause of concern. Also, for that matter, while Maruti Suzuki will benefit owing its Japanese Yen-based imports, Tata Motors JLR will suffer amid unfavorable GBP-USD movement.

OEMs growth to be likely led by Maruti Suzuki:

Domestic brokerage JM Financial expects revenue of auto OEMs under its coverage to increase by 14 per cent on year and 8 per cent sequentially led by healthy underlying volume growth. InCred expects double-digit on year growth in EBITDA for OEMs on the back of volume growth as well as product mix improvement.

Furthermore, the brokerage highlighted that growth in the OEMs or original equipment manufacturers segment will be led by Maruti Suzuki and Tata Motors, and Exide Industries & SAMIL in the auto component segment. “In our coverage universe’s EBITDA estimates, we are above Bloomberg consensus in the case of Tata Motors, Mahindra & Mahindra or M&M, SAMIL and Exide Industries but below consensus estimates for Bosch, Schaffler India, Eicher Motors and Ashok Leyland, it added.

Also, EBITA margin of companies under JM Financial’s coverage is expanded to increase by 200bps on-year and by 70 bps sequentially.

Auto sector’s strong EBITDA / EPS growth during 4Q is expected to be led by PV and 2W OEMs. CV / Tractor OEMs’ earnings will be supported by margin expansion owing to favourable RM prices, the brokerage noted.

Auto ancillaries continue to show momentum:

The companies covered by JM Financial are expected to log 14 per cent on year growth while 2.5 per cent sequentially. This is on the back of  healthy growth in underlying PV and 2W production and  moderate growth in replacement demand (for tyres). EBITDA margin of auto component companies under our coverage is expected to expand by 110bps YoY (flat QoQ) led by moderating inflation and higher operating leverage.