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Sector Name - Autos
Potential Result Outperformer: Apollo Tyres
Potential Result Underperformer: Bajaj Auto
Result Expectations – Key Highlights
�� We expect strong YoY growth in profit and sales aided by a low comparable
base. However, on a sequential basis, we expect decline in net profit despite
single digit growth in sales. This reflects fall in margins, impacted by high
costs related to commodity prices and currency fluctuations.
�� Commercial vehicle majors will likely register strong YoY increase in sales
given the lower comparable base of last year, but are likely to decline on a
sequential basis following pre-buys in the previous quarter. Passenger car
players are expected to witness strongest sales growth driven by structural
demand while two wheeler companies will also register double digit growth,
also aided by differential festive periods.
�� We expect Tata Motors’ consolidated sales to grow 23% YoY driven by
standalone operations (mainly CVs) as well as JLR. We expect sharp
increase in margins, solely due to JLR (up 670bps at 16.5%, similar to the
previous quarter), despite decline in margins of standalone operations due to
emission related cost pressures. Consolidated profit, forecast at Rs.22.7bn,
will compare favourably to Rs.8.5bn last year, again driven by strong
performance at JLR. Standalone profit is expected to decline 14% at Rs
3.7bn in tandem with EBITDA.
�� Amongst other commercial vehicle companies, we expect Ashok Leyland’s
sales to increase by 15% driven by a 13% increase in volumes. Margins are
expected to decline 140bps (130bps sequentially) due to emission related
costs. This is also reflected in our profit estimates (down 22% yoy and 51%
qoq). Eicher Motor’s profit should register growth due to weak performance
last year, but decline 7% qoq due to lower margins.
�� We expect Maruti’s sales to grow 28% YoY (and 5% qoq) led by domestic
car demand. Margins, however, are expected to decline 520bps yoy due to
higher royalty. On a sequential basis, we expect margins to decline 40bps
due to rising input cost, currency and mix impact, i.e. shift to K series.
�� We expect M&M to register 38% YoY rise in sales, driven by 32% rise in
volumes. Margins are expected to increase 70bps at 15.6% (but down 20bps
sequentially), reflecting a shift to the relatively more profitable tractor
business, offsetting cost pressures. We expect profit to grow 54% yoy driven
by volumes; however, on a sequential basis we expect profit to decline 11%
�� In the two wheeler space, Bajaj Auto is expected to be the strongest
performer due to high-teens volume growth, also supported by a low
comparable base. However, on a QoQ basis, we expect profit to decline by
9% due to a 6% decrease in volumes. Hero Honda’s anticipated 32% sales
growth will be driven by 28% growth in volumes, though we expect profit
growth will be slower at 3%, due to lower margins on delayed price hike and
higher emission related costs. TVS Motor is expected to register strong YoY
profit growth (128% yoy), benefiting from operating leverage and better
margins on improved sales mix. However, on a sequential basis, we expect
profit to decline 2% due to a slight decline in sales.
We expect Apollo Tyres’ standalone profit will likely decline 65% yoy and 5%
qoq due to a sharp rise in input costs. Subsidiaries will somewhat cushion
this impact (mainly Europe) but consolidated profit is still expected to decline
53% YoY, though improve 65% qoq.
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