Auto cos to clock modest growth in Q4FY13: Angel Broking

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26 Aug, 2025 12:21

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Angel Broking has come with its March`13 quarterly earning estimates for auto and auto ancillary sector. The research firm continues to prefer stocks that have strong fundamentals, high exposure to rural and export markets and command superior pricing power.

A challenging quarter- The domestic automotive industry witnessed a sharp slowdown in 4QFY2013 as the sales momentum, which had recovered slightly during the festival season, lost steam owing to weak macroeconomic environment and poor consumer sentiments. While the sales of medium and heavy commercial vehicles (MHCV), passenger cars (PC) and tractors declined considerably during the quarter, the pace of growth in the utility vehicle (UV) and light commercial vehicle (LCV) segments sustained momentum despite the challenging environment. The total industry volume growth slowed down to ~4 percent yoy YTD in FY2013 as MHCV, PC and tractor sales witnessed a decline of ~23 percent, ~5 percent and ~3 percent yoy respectively. However, the UV and LCV segments reported a strong growth of ~55 percent and ~15 percent yoy respectively YTD in FY2013. Going ahead, we expect the volume growth to remain sluggish in 1HFY2014 due to high inventory levels and weak consumer sentiments. We expect volumes to recover in 2HFY2014 led by further easing of interest rates, festival demand and also on account of the base effect.

Sector’s earnings growth to turn negative- For 4QFY2013, we expect automotive OEMs in our coverage universe to register a modest revenue growth of ~2 percent following a ~4 percent yoy decline in volumes on account of weak macroeconomic environment and poor consumer sentiments. However, growth in net average realization is expected to remain strong, driven largely by an improving product-mix. On a sequential basis, we expect net sales to register a strong ~7 percent growth, aided by strong sequential volume growth at Maruti Suzuki (MSIL) and Tata Motors (TTMT; mainly at Jaguar and Land Rover). We expect the EBITDA margin to remain under pressure and report a decline of ~60bp yoy owing to higher discounts and lower utilization levels across most of the companies. We expect net profit to decline sharply by ~23 percent yoy on account of contraction in operating margins, high levels of depreciation (primarily on the Jaguar and Land Rover front) and higher tax rate (mainly at MSIL, Mahindra and Mahindra and TTMT). Excluding TTMT, the earnings of our OEM universe are expected to decline by ~9 percent yoy, on account of EBITDA margin pressures and due to higher tax rate; however, top-line is expected to grow by ~4 percent yoy.

Outlook: While the near term environment continues to remain challenging for the automotive sector, we believe the long-term structural growth drivers for the industry such as GDP growth (leading to increasing affluence of rural and urban consumers), favorable demographics, low penetration levels, entry of global players and easy availability of finance, remain intact. We continue to prefer stocks that have strong fundamentals, high exposure to rural and export markets and command superior pricing power. We maintain our positive stance on Hero MotoCorp, Maruti Suzuki, Mahindra and Mahindra and Tata Motors.

(Rs- Cr)

Company	Net Sales		Net Profit		Reco.
	4QFY13E	% chg	4QFY13E	% chg
Ashok Leyland	3,407	-19.6	16	-93.8	Buy
Bajaj Auto	4,664	3.3	733	-5.1	Accum.
Hero Motocorp	6,020	1	492	-18.5	Buy
Maruti Suzuki	12,680	10.4	722	12.8	Buy
M&M	10,150	9.8	773	0.9	Buy
Tata Motors	50,305	-0.6	2,298	-35.4	Buy
TVS Motor	1,775	10.7	53	-7.8	Buy
Apollo Tyres	3,228	-0.1	181	15.4	Buy
Bharat Forge	734	-23.2	62	-50.6	Accum.
Bosch	1,953	-13.9	181	-46.1	Neutral
Exide Industries	1,550	7.2	126	-11.8	Accum.
FAG Bearings	326	-9.4	30	-34.4	Accum.
Motherson Sumi	7,035	10.5	144	41.2	Accum.

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