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Strong revenue growth to drive up earnings
We expect a strong quarter for auto companies under our
coverage universe* driven by 30.5% revenue growth YoY
and 14% QoQ. We expect EBITDA margins to expand by
59bps YoY but expect this to contract by 26bps QoQ.
Among large-cap auto stocks, Tata Motors and Hero
MotoCorp is likely to be the best performers followed by
Bajaj Auto. Overall, we expect net profit to increase by
35% YoY and 27% QoQ in 4QFY12E for the companies
under our coverage universe.
Key Highlights:
Volume momentum to be strong for 4W: During the
quarter, volume momentum for 4W companies has
remained strong (up 13% YoY and 25% QoQ) compared to
two-wheeler companies (up 6% YoY but down 2.5% QoQ,
in line with overall slowdown witnessed by the industry).
Margins a mixed bag: Input cost pressure is likely to
remain higher on both YoY and QoQ basis. However,
strong volume growth for most of the companies will
largely help to offset cost pressures. For our coverage
universe, we expect EBITDA margins to expand by 59bps
YoY, but contract 26bps QoQ. We expect a sharp
sequential improvement in margins for both Maruti and
Ashok Leyland led by strong volume recovery for both
companies. For M&M, we expect sustained margin
pressure on account of an adverse mix (lower tractor
sales). We expect Tata Motors to drive sector growth with
strong 67% earnings growth driven by 44% YoY growth in
revenues and 186bps margin expansion YoY.
Strong revenue growth to drive strong earnings
growth: We expect adjusted PAT to register a growth of
35% YoY and 27% QoQ. Among large-cap auto stocks,
Tata Motors and Hero MotoCorp are likely to be the
best performers, followed by Bajaj Auto.
Valuations and recommendations: We continue to
remain positive on Bajaj Auto in the 2W space and on
Mahindra & Mahindra and Maruti in the 4W space. We
maintain our Hold rating on Hero MotoCorp and Tata
Motors and maintain Sell on Ashok Leyland.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Strong revenue growth to drive up earnings
We expect a strong quarter for auto companies under our
coverage universe* driven by 30.5% revenue growth YoY
and 14% QoQ. We expect EBITDA margins to expand by
59bps YoY but expect this to contract by 26bps QoQ.
Among large-cap auto stocks, Tata Motors and Hero
MotoCorp is likely to be the best performers followed by
Bajaj Auto. Overall, we expect net profit to increase by
35% YoY and 27% QoQ in 4QFY12E for the companies
under our coverage universe.
Key Highlights:
Volume momentum to be strong for 4W: During the
quarter, volume momentum for 4W companies has
remained strong (up 13% YoY and 25% QoQ) compared to
two-wheeler companies (up 6% YoY but down 2.5% QoQ,
in line with overall slowdown witnessed by the industry).
Margins a mixed bag: Input cost pressure is likely to
remain higher on both YoY and QoQ basis. However,
strong volume growth for most of the companies will
largely help to offset cost pressures. For our coverage
universe, we expect EBITDA margins to expand by 59bps
YoY, but contract 26bps QoQ. We expect a sharp
sequential improvement in margins for both Maruti and
Ashok Leyland led by strong volume recovery for both
companies. For M&M, we expect sustained margin
pressure on account of an adverse mix (lower tractor
sales). We expect Tata Motors to drive sector growth with
strong 67% earnings growth driven by 44% YoY growth in
revenues and 186bps margin expansion YoY.
Strong revenue growth to drive strong earnings
growth: We expect adjusted PAT to register a growth of
35% YoY and 27% QoQ. Among large-cap auto stocks,
Tata Motors and Hero MotoCorp are likely to be the
best performers, followed by Bajaj Auto.
Valuations and recommendations: We continue to
remain positive on Bajaj Auto in the 2W space and on
Mahindra & Mahindra and Maruti in the 4W space. We
maintain our Hold rating on Hero MotoCorp and Tata
Motors and maintain Sell on Ashok Leyland.
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