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HDFC Securities Institutional Equities
The auto sector has outperformed the Nifty Index in Q4, led largely by a sharp rally in some two-wheeler and passenger vehicle stocks.
We continue to maintain our Buy rating on both Mahindra and Mahindra Ltd. and Maruti Suzuki Ltd. as we expect both of them to continue to outperform the utility vehicle segment, which would in turn help improve their performance.
Auto ancillary companies to post single-digit revenue growth QoQ
The demand from PVs and two-wheelers had been favorable for auto ancillaries on a YoY basis. The growth from PVs is likely to taper off from Q1 FY25 due to a high base in FY24.
The demand for commercial vehicles is likely to remain muted as well. With significant exposure to Europe, higher input and freight costs are likely to keep margins under pressure for most auto ancillaries.
Overall, auto ancillaries within our coverage universe are expected to post 11% QoQ earnings growth.
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