Auto cos likely to post 29% sales growth in Q4: Emkay

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26 Aug, 2025 12:21

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Emkay Global Financial Services has come with its quarterly earning estimates on automobiles sector for March 2012. The research firm believes budget has raised red flags which can delay the cyclical recovery in demand for 4 wheelers. We maintain our preference for 2 wheelers.

• We expect our automobile universe to report 29% YoY/13% QoQ growth in sales to Rs 891bn driven by volumes and pricing action. Excl. TML subs, sales growth to moderate to 15% YoY/17% QoQ to Rs 549bn
• Adjusted EBIDTA at Rs 119bn (35% YoY growth) is expected to benefit from lag impact of moderation in input costs. Sequentially, EBIDTA is expected to be up by 16% on operating leverage benefits and stable metal prices. Excl. TML subs, EBITDA growth is likely to moderate to 4% YoY and 23% QoQ to Rs 58.5 bn
• Adjusted EBIDTA margins to expand by 50bps YoY and 30bps QoQ to 13.3%. Excluding TML subs, margins to decline by 110 bps YoY but improve 40bps QoQ to 10.6%. Sequential improvement is largely seen across most companies. AL (330 bps), Eicher (70 bps), HMCL (40 bps) and MSIL (257 bps) to report improvement QoQ. BJAUT, MM and TVSL
  to report marginal decline in margins QoQ.
• APAT to increase 31% YoY and 23% QoQ to Rs 70 bn. Ex TML subs, APAT to expand 5% YoY and 33% QoQ to Rs 36bn. Strong sequential improvement is expected in AL (190%), MSIL (173%) and driven by operating leverage benefits and favorable forex/metal contracts
• Key things to focus will be impact of price hikes on demand/margins, discount levels, impact of currency swings and raw material contracts
• We believe budget has raised red flags which can delay the cyclical recovery in demand for 4 wheelers. We maintain our preference for 2 wheelers. We have ACCUMULATE rating on HMCL, BJAUT and TTMT (due to JLR). We maintain REDUCE on MSIL and HOLD on MM, AL, EIM and TVS.