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Quick Pointers

* Growth momentum sustained led by SUVs, scooters and greener vehicles

* RM costs and supply chain constraints pose margin pressure

Q4FY26 saw double-digit wholesale volume growth as sentiments remained positive post GST 2.0 rationalization, earlier festivities, wedding season, easier financing, growth in overall economy, and improved rural sentiments driven by good rainfall. Retail demand remained intact even as most OEMs hiked prices, usually done every new CY, with indication of taking further hikes if RM and fuel prices remain inflated. Improved scale and mix, new model launches/ facelifts, and sustained exports with INR depreciation further helped topline. The impact of geopolitical tensions was very limited for the quarter, although uncertainty looms from supply chain constraints and higher costs in case of prolonged crisis that can also lead to production cuts and margin drop (more so in Q1FY27 due to hedging contracts) if the OEMs absorb the costs partially. Top picks amongst our coverage are M&M, TVS and HMCL.

* PVs driven by SUVs and inventory correction:

Wholesale volume growth was in low double digits YoY as the preference for SUVs continued to increase, whereas small cars saw moderation in growth after the cheer from GST 2.0 rate cuts. Jan/Feb saw PV inventory correcting to levels of ~ 33/28 days from the recent 38 days+, indicating better retail-wholesale alignment and closer to FADA’s recommended benchmark of 21 days. New launches, especially SUVs and EVs received overwhelming response as non-metro locations led the segment growth.

* Broad-based 2W growth:

Wholesale volume growth for the 2W segment was in mid-20s YoY. Increased sales, especially in entry-level motorcycles, kept the segment strong. However, below-normal monsoon in FY27 could dampen rural sentiments and, in turn, entry-level motorcycle demand. Scooters continued to grow quicker as urban growth slightly outpaced rural across overall 2W segment. Our channel checks suggested longer-than-usual wait periods for some indemand models and variants as OEMs build up capacity to meet the sustained demand.

* CV and tractor demand remains resilient:

MHCVs reported stronger volume growth since Q3FY26-end as bulk buyers came up with replacement demand even as freight rates kept moving higher. However, with rising fuel costs, supply chain constraints and weaker Bus sales in March’26, LCVs turned out to be the growth drivers with a mixed FY27 outlook for CVs. Tractor sales remained strong with Chaitra Navratri falling completely in Mar this year and positive rabi harvest outlook, although below-normal monsoon/ erratic rains due to El Nino along with supply risks, can dent FY27 growth.

* Margin pressure from RM and fuel costs:

The West Asia conflict and rising RM prices (precious metals, steel, aluminum, copper) are expected to impact margins for the OEMs partially in Q4FY26 and more so in the upcoming quarters along with production cut expectations if supply chain risks persist.

Bajaj Auto: It has been gaining market share in the strategic 125cc+ segment driven by Pulsar and 150cc+ sports portfolio as the domestic motorcycle industry saw sharp revival in demand after GST 2.0 rate rationalization. The management aims to outpace industry growth in this sub-segment, although <125cc volumes, which form ~2/3rd of its domestic motorcycles in FY26, remain under pressure. New product launches/interventions, shifting consumer preference toward e2Ws, and sustained exports (with depreciating INR) should enhance the topline. EBITDA margin of overall EV portfolio is improving to double digits, and better scale should increase overall margins, although RM costs are to be watched out for. It retains CV leadership, although shift in preference for EVs presents some challenge where peers are catching up quickly. We estimate volume/realization CAGR of 8.8%/5.7% over FY25-28E, translating into revenue/EBITDA/PAT CAGR of 14.9%/15.7%/15.9%. We upgrade the stock to ‘Accumulate’ rating (previous ‘HOLD’) with TP of INR10,000 (previous INR9,500), reducing the target P/E multiple to 22x (previous 23x) based on FY28E EPS.

Hero MotoCorp: Entry-level motorcycle industry has seen revival with HMCL gaining market share, although the premium portfolio hasn’t yet reaped the benefits of GST2.0 rate rationalization. Retail market share saw a surge during Sep-Oct’25 festivities. Since then, it has seen a dip on YoY basis, but has been recovering along with YoY reduction in inventory. Below-normal monsoons can dampen rural sentiments and impact its motorcycle sales. Scooters and overall exports keep surging, albeit on a lower base. Its e2W market share is also growing in line with the industry. New model launches will be important to track, but margins can remain under pressure for upcoming quarters due to the geopolitical tensions. We estimate volume/realization CAGR of 6.4%/4.5% over FY25-28E, translating into revenue/EBITDA/PAT CAGR of 11.3%/11.8%/10.9%. We assign ‘Accumulate’ rating with TP of INR6,000 (previous INR6,300) valuing the stock at P/E of 18x (previous 20x) FY28E EPS and value its stake in Hero Fincorp at INR47 and in Ather Energy at INR300.

TVS Motor: It has gained market share as it posted strong volume growth across all segments with its e2W portfolio being the market leader, capturing the shift in consumer preference toward greener vehicles amid rising fuel prices. Better scale and mix and PLI benefits could be partially offset by RM inflation and supply chain constraints. Its 3W domestic sales have doubled, while exports have surged in FY26. Growing exports exposure and depreciating INR adds to profitability. Upcoming launches would be important to track. We estimate volume/realization CAGR of 14.7%/4.3% over FY25-28E, translating into revenue/EBITDA/PAT CAGR of 19.6%/23.4%/26.7% over FY25-28E. We assign the stock ‘Accumulate’ rating with TP of INR4,150 (previous INR4,200), reducing the target P/E multiple to 35x (previous 42x) based on FY28E EPS, and INR86 for TVS Credit.

Eicher Motors: Royal Enfield (RE) volumes have been consistently growing in double digits with a strong product portfolio, model refreshes and investments in customer retention post which the management announced capacity expansion plans. The 350cc+ segment had seen decline post GST2.0 rate rationalization. Although recent months have seen modest growth revival, it remains <8% of the domestic volumes in FY26. Q3FY26 saw unexpected margin growth as the company engaged in cost savings program with improved scale; however, a weaker mix (lower margin 350cc models) and RM costs will keep the margins under pressure. VECV volumes have also grown in high teens, further adding to the financials. Although risks for the CV industry from geopolitical tensions have led to a correction; this we believe is an opportunity to accumulate the stock. We estimate RE volume/realization CAGR of 11.8%/2.4% over FY25-28E, translating into revenue/EBITDA/PAT CAGR of 14.5%/14.6%/14.5%. We upgrade the stock to ‘Accumulate’ rating (previous ‘HOLD’) with TP of INR7,700 (previous INR7,650). We value RE at P/E of 32x basis FY28E core EPS and continue valuing VECV at 10x FY28E EV/EBITDA multiple.

Mahindra & Mahindra: Strong SUV portfolio and increasing customer preference toward the sub-segment, with new launches, including EVs, are consistently driving strong volumes, premiumization and improved realization. Margin contraction due to RM costs could be offset by improved scale and mix. Farm volumes have been strong with improved mid-term industry growth expectations, where M&M is the market leader. However, below-normal rainfall in FY27 can dent demand. We estimate volume/realization CAGR of 10.0%/4.0% over FY25-28E, translating into revenue/EBITDA/PAT CAGR of 15.0%/14.6%/16.7%. We upgrade the stock to ‘BUY’ rating (previous ‘Accumulate’) with TP of INR3,850 (previously INR4,050). We value the stock via SOTP, valuing the core business at P/E of 24x (previous 26x) FY28E EPS and its share of subsidiaries’ value.

Maruti Suzuki: The mini and compact segment saw subdued growth post a jump after GST2.0 rate cuts as SUV demand remained intact. Sales of e-Vitara and upcoming SUV launches are to be watched out for. Its margins and overall market share remain under pressure; however, sustained exports and weaker INR should aid revenue. While further management guidance revision is awaited, current market correction presents an opportunity to accumulate the stock. We estimate volume/realization CAGR of 6.1%/8.4% over FY25-28E, translating into revenue/EBITDA/PAT CAGR of 15.1%/13.9%/12.6%. We upgrade it to ‘Accumulate’ rating (previous ‘HOLD’) with TP of INR15,200 (previously INR15,750), valuing it at P/E of 23x (previous 25x) FY28E EPS.

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