Auto Sector Q3 Results Preview - Margin Recovery Likely, Challenges Lined Up Ahead: Axis Securities
Going forward in FY24, while we maintain a positive outlook on the sector, we foresee a more challenging landscape ahead.
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Axis Securities Report
In Q3 FY23, we expect auto original equipment manufacturers under our coverage to report revenue de-growth of 6% QoQ and Ebitda to marginally decline by 1.5% QoQ.
On the positive side, their Ebitda margins are expected to improve by ~50 basis points QoQ. The revenue de-growth QoQ would be mainly led by a double-digit decline in wholesale volumes of passenger vehicles due to lower demand for entry-level vehicles (Maruti Suzuki India Ltd. higher discounts); double-digit volume decline in two-wheelers (other than Royal Enfield) due to poor demand in entry-level motorcycles; and lower exports due to poor macro-economic conditions (unavailability of U.S. dollar in African region).
This will be partially offset by-
commercial vehicle (Ashok Leyland Ltd.) volumes, which stood robust and grew by mid-single digits with CV witnessing up-cycle and pick up in the infra activities. The total domestic medium and heavy commercial vehicle segment (trucks plus buses) of Ashok Leyland stood robust and witnessed a growth of 70%/11% YoY/QoQ.
tractor OEM (Escorts Kubota Ltd.) reported 18% QoQ growth in sales volume on account of strong Rabi sowing and good Kharif procurement. The sentiments continue to remain upbeat in the farming sector, leading to strong demand for tractors and farm implements.
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