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Autos to begin FY20 in slow lane
* FY20 to begin in slow lane, with lower Q1 volumes, due to high base, purchase deferrals during elections and tight liquidity conditions. Aggregate revenue (excl. TTMT) to fall 3% yoy, led by lower topline in most companies, except for MSS (13%) and TVSL (10%).
* Margins to contract on lower scale despite the softening in input prices. Aggregate EBITDA margin (excl. TTMT) to contract by 50bps qoq. Battery companies, such as Exide and Amara, to buck the trend with 60/50bps qoq expansion on lower lead prices.
* The Street should focus on management commentary on volume revival ahead, led by pent-up demand and BS6 pre-buying, which should aid a better end to FY20. Within auto, we prefer PV companies that are relatively less affected by the BS6 transition.
* In sector EAP, our strong OW positions remain on MM (TP: Rs790), MSS (TP: Rs144), MSIL (TP: Rs6,700) and EXID (TP: Rs267). Our top Sell-rated names with strong UW stance in sector EAP are EIM (TP: Rs17,200), BJAUT (TP: Rs2,500) and AL (TP: Rs71).
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