India Automobiles Q3 Results Preview - Benign Commodity Costs To Aid In YoY Margin Expansion: Systematix

Systematix Research Report

Demand momentum for commercial vehicles remains robust, with volumes having surged QoQ during Q3 FY23; light commercial vehicles however, declined sequentially. The passenger vehicle segment also continues to see strong demand, albeit only in the utility vehicle segment (now forming 51% of total PVs) while demand for entry level cars remains subdued.

Two-wheeler demand is consolidating, wherein only scooters and premium motorcycles (125cc+) are seeing recovery. Tractors continue to do well. Exports remain muted across segments.

With prices of key commodities having corrected over the past two quarters (prices across the basket were lower 10-30% YoY in Q3 FY23), we expect Ebitda margin to expand YoY across most original equipment manufacturers, though operating deleverage will likely impact margins QoQ for some OEMs. For ancillaries, expected pass-through of commodity price benefits over H2 FY23 would aid operating margins during the quarter.

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