Auto Players Could Miss Q3 Estimates But This Firm Could Surprise, Says Nomura
Nomura has advised being selective. Among its top picks are Mahindra and Mahindra, followed by Hyundai.
Most automobile companies of India are likely to post lower-than-expected numbers in the quarter ended December, according to Nomura, but Ashok Leyland Ltd.'s numbers might positively surprise the market.
Among the companies the brokerage sees missing its estimates are Maruti Suzuki India Ltd., Eicher Motors Ltd., Bajaj Auto Ltd., Bharat Forge Ltd., Hyundai Motor India Ltd. and Uno Minda Ltd.
"Globally, volume growth trends have seen some improvements, especially in the US," Nomura said. Going ahead, it expects consumption demand to remain slow across segments. "Lower end segments like entry 2Ws/small cars are likely to be more impacted, while premium segments such as SUVs, >125cc bikes and EVs can continue growing faster."
Nomura expects the K-shaped growth to continue and 5%/7% industry volume growth in PVs/2Ws in FY26F. "Moreover, the growth could come at the cost of margins as capacity utilisation is likely to drop in FY26F and OEs will push harder for growth," it said. "We expect the companies with stronger model cycles could benefit."
According to the brokerage, domestic volume growth remained modest across segments in December quarter at 3%/4%/5% year-on-year in two-wheelers, large commercial vehicles and passenger vehicles, while medium heavy commercial vehicles declined 1% YoY.
The brokerage has advised being selective. Among its top picks are Mahindra and Mahindra Ltd., followed by Hyundai.
Overall, it expects the recovery to continue in mass segments such as two-wheelers, led by a good monsoon, farm income recovery, and a low base.
The brokerage also noted some factors, which may lead to weak capacity utilisation and freight rates. "The affordable EV model launches across players should further drive the EV adoption trend," it said. "We expect MHCV demand to remain impacted due to below-target infra spends by the government and slower GDP growth."
The Nifty Auto traded 0.7% up at 22,868.35 as of 1:09 p.m., with Tata Motors Ltd., Exide Industries Ltd., Ashok Leyland Ltd., and Bharat Forge Ltd. leading gains.
