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Prabhudas Lilladher Report
We expect Q2 FY24 to show strong YoY revenue and margin improvement, aided by strong tailwinds from realisation, operating leverage for few original equipment manufacturer and benign commodity prices. In Q2 FY24, auto industry witnessed overall flattish volumes -1.1% on back of decline in two wheeler and Tractors. For our OEM coverage universe, we expect-
aggregate revenue to grow by plus 26% YoY (including Jaguar Land Rover; +17% excluding JLR) owing to sharp rise in average selling price from price hikes, higher volume and better mix and
Ebitda margin to expand ~320 basis points YoY (including JLR) led by lower commodity cost and superior product mix. Commodity costs continue to remain benign which should continue to aid margins.
Festive season is the next major catalyst for the automobile industry, while the expectations are high and initial trends for regional festive periods have shown positive momentum, a lot depends on the one-month festive period which starts from mid-October.
OEM have built inventory in anticipation of strong growth and higher retails would be key to avoid large inventory backlog post the festive season.
We introduce FY26E for our coverage universe, change our earnings estimates for FY24-25E for all the companies in the range of -5% to +6%.
Our top picks are Maruti Suzuki India Ltd., Tata Motors Ltd. and Ashok Leyland Ltd.
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