Motilal Oswal has come with its September`12 quarterly earning estimates for auto sector. The research firm is downgrading their earnings estimates for Bajaj Auto and Hero MotoCorp to factor in weaker than expected demand and adverse currency movement (except Bajaj).
Volume slowdown visible across segments, except UVs/LCVs. While commodity prices are benign, adverse product mix and Fx movement would lead to an increase in RM cost by 30bp QoQ and 10bp YoY. We estimate 2QFY13 EBITDA margins to decline 70bp QoQ (70bp YoY), impacted by adverse product mix, adverse Fx movement and negative operating leverage. Maruti Suzuki (-200bp YoY/-290bp QoQ) and Hero MotoCorp (-190bp YoY/-120 QoQ) would be worst impacted. We are downgrading our earnings estimates for Bajaj Auto and Hero MotoCorp to factor in weaker than expected demand and adverse currency movement (except Bajaj). We prefer Tata Motors, Maruti Suzuki and Bajaj Auto.
| Company | Sales | Net Profit | Ratings | ||||
| Sep.12 | Var.% YoY | Var.% QoQ | Sep.12 | Var.% YoY | Var.% QoQ | ||
| Bajaj Auto | 48,254 | -6.9 | -0.8 | 7,005 | -11.3 | -2.5 | Buy |
| Hero Motocorp | 51,770 | -10.5 | -16.6 | 4,401 | -27.1 | -28.5 | Buy |
| M&M | 95,445 | 30.6 | 3.2 | 8,656 | 17.4 | 19.3 | Buy |
| Maruti Suzuki | 82,507 | 5.4 | -23.4 | 1,175 | -51.1 | -72.3 | Buy |
| Tata Motors | 442,658 | 22.3 | 2.2 | 24,824 | 10.5 | -3.2 | Buy |
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