Automobiles Sector update :3QFY26 consolidated revenue grew 11.8% YoY to INR77.4b (in line with estimate of INR75b) by Motilal Oswal Financial Services Ltd
Earnings in line with estimates
* 3QFY26 consolidated revenue grew 11.8% YoY to INR77.4b (in line with estimate of INR75b).
* Gross margins grew 350bp YoY (-30bp QoQ) to 45% (in line with estimates), primarily due to cooling rubber prices.
* Consequently, margins also came in line at 15.3%, up ~170bp YoY.
* EBITDA grew 25.2% YoY to INR11.9b, in line with our estimate of INR11.6b.
* The company incurred a one-time expense of INR271m as estimated costs due to the change in labor codes.
* Adjusted for this expense, PAT came in line with our estimate at INR4.9b (up 44% YoY).
* S/A business revenue at INR51.4b was ahead of our estimate of INR 49b, growing 13.2% YoY (+9% QoQ). EBITDA margin improved ~350bp YoY to 14.5% (in line). PAT came in above our estimates because of higher than expected other income, which was due to dividends received from subsidiary companies.
* Derived EU revenue grew 9% YoY in INR terms, partly aided by favorable currency translation. EBITDA margins (derived) contracted 170bp YoY to 16.9%. We await details for the EU operations.
* Valuation: The stock trades at 18x/15x FY27E/FY28E consolidated EPS.
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