Auto sector to see robust growth in FY22; most stocks below 10-year average P/E

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26 Aug, 2025 12:21

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The Indian auto sector, passing through it worst cyclical downturns for over a year, has been dealt another blow by the coronavirus and the lockdown with economic activity at a standstill. The BSE Auto index has already tanked 34 percent in 2020.

“Overall in FY21E, the research firm expects domestic industry volumes to decline by 2%, 3%, 9%, and 17% in Tractors, PVs, 2Ws, and MHCVs, respectively. Recovery in tractors and PVs is likely to be sooner due to better rural sentiments and lower impact of the BS6 transition,” an the Emkay Research report has said.

The research firm said the recovery was delayed but the correction offered long-term opportunities. Expect a robust growth in FY22E, driven by a sharp recovery in volume growth, better rural sentiments, and pent-up demand, it said.

Let’s examine how these auto stocks valuations fared in the past, present, and what is expected. Data suggests that barring Maruti Suzuki and Escorts all auto stocks are trading below their 10-year average P/E (x).

Though there is a weakness in growth and the coronavirus outbreak will have an impact on the auto sector, Emkay Research retained a "buy" rating on Maruti Suzuki, Eicher Motors, Escorts, Ashok Leyland, Mahindra & Mahindra and Atul Auto.

The auto sector volume numbers in FY20 were already very weak and were likely to see a further drop in the next fiscal. The report said the sector volume would recover in the domestic market from H2FY21 and strong growth was likely in FY22, especially substantial growth in medium and heavy commercial vehicles (MHCVs).