India's auto and auto component companies are expected to report a strong March quarter, helped by robust volume growth, lower dealer inventory and operating leverage after demand improved following the GST cut. But rising commodity and energy costs are likely to temper margin gains and shift investor focus quickly to pricing actions and profitability risks in early FY27.
The quarter appears strongest for two-wheelers, commercial vehicles and tractors, where wholesale growth remained firm as dealer inventories stayed lean. Brokerages broadly expect volume-led operating leverage to support earnings, though the pace of profit growth may trail sales growth for some companies as raw material inflation returned late in the quarter. Ancillaries linked to domestic OEM demand are seen outperforming exporters exposed to weaker overseas markets.
The central issue this earnings season may not be Q4 growth itself, but whether companies can protect margins in the first half of FY27. Several brokerages expect management teams to flag higher steel, rubber, precious metals and energy costs, making price hikes and cost control the key variables for the next quarter. Demand durability amid geopolitical and macro uncertainty is the second major watchpoint.
Here's what analysts expect from Auto and Auto Components Q4 results
ICICI Securities
- Sector revenue and EBITDA seen rising ~20% and ~24% YoY, excluding TTMT
- Two-wheelers expected to outperform four-wheelers on earnings growth
- Auto OEMs, excluding TMPV, likely to benefit from volume growth and operating leverage
- Ancillaries may post softer growth than OEMs, though select names could outperform
- Demand sustainability after possible price hikes and supply-chain risks remain key monitors
Macquarie
- Strong quarter expected on healthy volumes and operating leverage
- Benign steel prices and weaker rupee may support margins
- Higher precious and base metal costs could offset some benefits
- Two-wheel demand seen resilient, while CV demand remains strong
- New launches may help passenger vehicle growth and market share gains
IIFL Capital
- Strong quarter expected after demand recovery sustained through Q4FY26
- Low dealer inventory supported wholesale dispatches across segments
- Margins may improve YoY but soften sequentially due to commodity inflation
- Management commentary may turn cautious on 1HFY27 margins
- Domestic suppliers seen stronger than exporters such as Bharat Forge and Balkrishna
Citi
- Healthy YoY volume growth should aid profitability for OEMs and parts makers
- Commodity inflation and higher energy costs may weigh on gross margins in Q4
- Margin risks could intensify further in 1QFY27
- Management commentary may focus more on upcoming cost pressures than reported Q4 numbers
- Preference order changed to Maruti, then Eicher, then M&M
CLSA
- OEM EBITDA margins expected lower sequentially as gross margins compress
- Seasonal strength and operating leverage may partly offset cost pressure
- Select ancillaries could see margin expansion on improving business momentum
- Tyre companies may face sequential margin decline from higher input costs and weaker rupee
- Pricing actions in 1QFY27 seen critical for protecting first-half margins
Motilal Oswal
- Aggregate OEM demand seen up 23% YoY across coverage universe
- Rising input costs likely to limit earnings growth despite strong volumes
- OEM outperformers include Bajaj Auto, Hero MotoCorp, TVS Motor and M&M
- Key ancillary outperformers include Craftsman, Samvardhana Motherson and tyre makers
- Sector outlook has turned cautious amid geopolitical risks and higher input costs
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