Published on 16/01/2020 12:17:47 PM | Source: Dolat Capital Market Pvt Ltd

Quarterly Auto & Auto Ancillaries Sector Overview By Dolat Capital

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Sector Overview

 * The automobile sector is likely to report another weak quarter in Q3FY20 (-1%/-2% YoY in Revenue/PAT on a low base), due to persistent weakness in retail sales (except in October) and the planned BS-IV inventory correction currently being undertaken by OEMs (primarily in the 2W/CV segment). We expect weak bottom line growth in Ashok Leyland (-81% YoY), Eicher Motors (-11% YoY), Hero MotoCorp (-10% YoY) and TVS Motors (-7% YoY), whereas Maruti Suzuki (+18% YoY) and Bajaj Auto (+7% YoY) are likely to report positive growth. Most auto ancillary companies are also likely to report lower growth, in tandem with the slowdown in demand from the OEMs.

* The tyre segment is likely to experience subdued volume growth, due to the slowdown in the automobile sector and muted replacement demand. Profitability continues to remain under pressure given high capex. However, battery companies are likely to report better performance, with a strong bottom line growth expected in Q3FY20 (Exide 30% YoY/ Amara Raja 23% YoY), due to high replacement demand across segments.

* The EBITDA margin for our auto coverage universe is likely to remain flat at 12.3% (-4bps YoY). As for prices of raw materials, natural rubber prices declined (-11% QoQ), while CR steel sheet and aluminium prices remained flat, and a lead marginally increased (+1% QoQ).

Quarterly Estimates


Quarterly Estimates – Cont’d


Quarterly Estimates – Cont’d


Quarterly Estimates – Cont’d 

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