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HDFC Securities Report
Demand is now back up to pre-Covid-19 levels across sectors, including two-wheelers, passenger cars and tractor segments.
The sales recovery is led by the further opening of various regions (unlock-five), sustained rural demand and inventory build-up ahead of the festive season.
We expect an all-round improvement in margins in Q2 FY21 driven by rising utilisation levels (production is now running at 65-90% of capacity).
Correspondingly, valuation multiple for auto companies continue to re-rate and are now trading at levels between mean price/earning and +1 standard deviation.
Nifty Auto index is up a further 20% over the quarter (versus 9% for the broader Nifty).
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