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Prabhudas Lilladher Report
In Q1 FY24, auto industry witnessed overall low single digit increase in volumes (2.5%) led by domestic volume of three-wheeler, two-wheeler and passenger vehicles, while exports two-wheeler continued to see a high double digit decline (-35% for original equipment manufacturers we track).
Tractors and commercial vehicle industry declined marginally by low single digits, on high base and pre-buying respectively. For our OEM coverage universe, we expect-
aggregate revenue decline of -3% QoQ (including Jaguar Land Rover; -4% excluding JLR) owing to fall in average selling price due to inferior product mix and
Ebitda margin to contract ~90 basis points QoQ (including JLR) led by input cost increase and inferior product mix, however, commodity costs have become favorable and should positively impact margins next quarter onwards, in our view.
The premium two-wheeler segment (+250cc) in India has seen increase in competition with entry of multiple models from Harley Davidson and Triumph Motorcycle at very attractive price points.
We see this disrupting the market for Royal Enfield who is market leader in the segment, and will need to move fast to maintain its dominance.
We change out earnings estimates for FY24-25E for all the companies in the range of -5% (Eicher Motors Ltd.) to 19% (Tata Motors Ltd.).
Nifty Auto index (+23%) has significantly outperformed the Nifty 50 (+8%) year-to-date.
Our top picks are Maruti Suzuki India Ltd. and Ashok Leyland Ltd.
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