NDTV Profit's special research section collates quality and in-depth equity and economy research reports from across India's top brokerages, asset managers and research agencies. These reports offer NDTV Profit's subscribers an opportunity to expand their understanding of companies, sectors and the economy.
Motilal Oswal Report
Motilal Oswal noted that while demand momentum has remained healthy in Q4, there are clear headwinds emerging for the sector given the ongoing geopolitical turmoil in Middle East. While most of the large companies across OEMs and ancillaries are managing gas supplies at their end very well so far (as well as their supply chain), there is no certainty that they would continue to do so in the coming months if this situation persists.
Beyond this supply risks, the most critical parameter to watch out for is the surge in input costs across all commodities in Q4, which could materially impact earnings from Q1 onwards. Further, the surge in crude oil prices remains a key risk to India's economic growth, which is likely to be detrimental for commercial vehicle outlook.
Even freight costs have increased for export-focused companies.
As a result, Motilal Oswal has implemented reasonable earnings cuts for its coverage universe, more so for FY27E than FY28E. That said, the brokerage expects input costs to stabilise at lower levels in the second half of the fiscal.
Major earnings cuts (ex Tata Motors PV) were seen in CEAT (-22%), Hero MotoCorp (-16%) and Apollo Tyres (-14%).
Given these headwinds, the auto universe has seen a sharp derating over the last month or so. OEMs seem to have seen a higher derating than auto ancillaries. In these circumstances, companies with strong fundamentals that have a healthy launch pipeline and the ability to outperform peers and/or are attractively valued will remain preferred bets.
Maruti Suzuki, TVS Motor, and Mahindra & Mahindra remain Motilal Oswal's top picks. Among auto ancillaries, the brokerage favors Motherson Sumi Wiring India, Samvardhana Motherson International, and Endurance Technologies.
Click on the attachment to read the full report:
DISCLAIMER
This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.
Users have no license to copy, modify, or distribute the content without permission of the Original Owner.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
