Automobiles Q4 Results Preview - Signs Of Growth Moderation Visible In Some Segments: Motilal Oswal

Motilal Oswal Report

Q4 FY23 witnessed a stable demand environment, though there were signs of volume growth moderation in some segments. Demand largely remained intact for medium and heavy commercial vehicels, tractors and domestic two-wheelers, whereas growth moderated for passenger vehicles and light commercial vehicles. Two-wheeler exports remained weak.

In terms of wholesale volumes, we estimate Q4 FY23 volumes to grow by 11% YoY for PVs, ~17% for M&HCVs, ~21% for tractors and ~9% for three-wheelers. Two-wheeler volumes were flat YoY due to a 32% decline in exports; however, domestic volumes grew 13%. LCV volumes are estimated to grow by 1%.

We estimate Ebitda margins to improve for the fourth quarter in a row, with a 120 basis points YoY gain (up 20 bps QoQ) for our auto original equipment manufacturer universe (excluding Tata Motors Ltd.), led by full benefits of raw material cost moderation, favorable forex and operating leverage benefits. Except for Bajaj Auto Ltd. and Mahindra and Mahindra Ltd., all OEMs are likely to report margin expansion QoQ.

We revise our FY24E earnings per share for select companies to account for demand evolution in the domestic market, weakness in exports, and commodity price/FX changes.

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