Except for tractors, which continue to witness healthy demand, all other segments continue to see a subdued demand environment. With the ongoing global tariff war, there is likely to be prolonged uncertainty on the global automotive demand outlook, and hence for ancillary companies with high global exposure, as global OEMs look to adjust their supply chains to the new reality. Hence, Motilal Oswal prefers to avoid companies that have material global exposure, at least in the near term.
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Motilal Oswal Report
Auto OEMs within our coverage universe are expected to deliver ~6% YoY volume growth in Q4 FY25. However, the end-market demand in Q4 has been weaker than the headline number suggests.
Overall, growth was largely driven by new launches from Mahindra and Mahindra, TVS and Royal Enfield, while Hero MotoCorp, Bajaj Auto, Hyundai Motors India and Maruti Suzuki posted subdued growth. Commercial vehicles continued to post a decline in volumes.
For our OEM coverage universe (excluding Jaguar LandRover), we expect revenue/Ebitda/PAT to grow ~7%/5%/2% YoY in Q4 FY25. Within this, TVS (+39%), M&M (+19%), Eicher (+20%) and Ashok Leyland (+14%) are likely to outperform peers in terms of earnings growth. On the other hand, Hyundai and Maruti Suzuki are likely to post an earnings decline.
For auto ancillaries, we expect our coverage universe to post ~7% growth in revenue and a decline of 4%/10% YoY in Ebitda/PAT in 4Q. It is important to highlight that only five out of 16 companies are likely to post earnings growth, with no company expected to post double-digit earnings growth.
Overall earnings estimate cuts have been moderate in this quarter, with CEAT (-11%/- 8%) and MRF (-11%/-13.5%) seeing the highest cuts for FY25E/FY26E. Meanwhile, most other players have seen single-digit earnings cuts.
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