Auto Sector Q3 Outcomes Overview: Progress slows, earnings hit; PVs lead, 2Ws battle; Maruti, M&M, Hyundai prime picks

The Indian auto sector witnessed a combined efficiency in Q3FY25, with home volumes rising at a modest 3% year-on-year (YoY), excluding tractors. Whereas festive season reductions and new launches supplied a brief enhance, profitability remained underneath stress attributable to rising advertising and marketing bills, foreign exchange volatility, and better reductions.

Section-Sensible Efficiency: PVs Lead, CVs and 2Ws Battle

Passenger automobile (PV) gross sales led the expansion at 4.5% YoY, primarily pushed by an 11.5% YoY enhance in SUV and van volumes. Nonetheless, passenger automobile gross sales declined by 8% YoY, reflecting weaker demand for small automobiles.

The industrial automobile (CV) section struggled, with total progress at simply 1% YoY. Whereas the bus section supported medium and heavy industrial automobiles (MHCVs), the products section contracted by 5% YoY. Mild industrial automobiles (LCVs) posted a reasonable 3% YoY progress, in accordance with a report by Motilal Oswal Monetary Providers (MOFSL).

Two-wheeler (2W) exports confirmed a promising 29% YoY enhance, albeit on a low base. Nonetheless, home 2W demand remained sluggish regardless of improved rural sentiment. In distinction, the tractor section recorded a robust 14% YoY progress, benefiting from sturdy rural demand.

Export Outlook: Restoration Stays Unsure

Whereas Q3 outcomes of Indian auto firms noticed some export restoration for 2Ws and PVs, the demand outlook stays unsure. Two-wheelers and PV export volumes grew 29% and 19% YoY, respectively, albeit on a low base. Rising markets, together with Africa, Latin America, and the Center East, have proven indicators of revival, benefiting firms like Bajaj Auto and TVS Motor Firm, MOFSL mentioned.

Nonetheless, PV demand stays weak in developed markets, significantly the European Union (EU), with some resilience in North America. The dearth of broad-based demand restoration poses challenges for auto ancillary companies with vital world publicity.

Earnings Underneath Strain: Larger Prices, Foreign exchange Influence Weigh on Margins

For the MOFSL protection universe of auto firms’ (excluding CIE India), income grew 7% YoY, in step with expectations. Nonetheless, EBITDA and PAT declined by 2% and three% YoY, respectively, attributable to elevated advertising and marketing bills, larger festive season reductions, and forex-related losses. EBITDA margins contracted by 120 foundation factors YoY to 13%.

Amongst auto authentic tools producers (OEMs), income grew 7%, however EBITDA and PAT fell by 1% and a pair of% YoY, respectively. Auto ancillary firms noticed income rise by 8% YoY, however EBITDA declined by 8% YoY, and PAT remained flat.

EPS Downgrades

With demand moderation and unsure exports, earnings downgrades had been reported for 14 out of 25 protection firms. Hyundai Motor India (-9%) and Escorts Kubota (-10%) noticed notable cuts of their FY26E EPS projections. Auto ancillary firms like Exide Industries (-13%), Samvardhana Motherson Worldwide (-15%), Bharat Forge (-17%), and Craftsman Automation (-20%) additionally confronted vital revisions.

Auto Sector Prime Picks

Regardless of current inventory corrections, MOFSL stays optimistic on the PV section, anticipating a gradual restoration from FY26 onward. Maruti Suzuki India stays the highest sector choose, adopted by Mahindra & Mahindra (M&M) and Hyundai Motor India.

Amongst auto ancillaries, MOFSL prefers Endurance Applied sciences, Pleased Forgings, and Samvardhana Motherson Worldwide.

Whereas This fall is predicted to see secure margins, demand progress throughout 2Ws, PVs, and CVs is more likely to stay within the low to mid-single digits. Ancillary firms with world publicity might proceed dealing with headwinds, protecting profitability underneath stress within the close to time period.

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