Analysts, however, caution that the sharp increase in prices of major commodities such as steel, aluminum, copper and rubber in the last quarter would be a negative for the gross margin of the companies.That said, most original equipment manufacturers (OEMs) have taken price hikes from January onwards to partly counter the negative impact of the same.
At the bourses, the Nifty Auto index grew 15.3 per cent in Q3FY21, thus underperforming the benchmark Nifty50 index which rallied 22.46 per cent during the same period.
Kotak Institutional Equities (KIE) sees revenues for the auto companies, under its coverage, increasing by 19 per cent YoY in Q3FY21 while earnings before interest, tax, depreciation, and ammortisation (Ebitda) may improve by 48 per cent year-on-year (YoY) due to strong volume performance and cost-cutting measures.
BP Wealth too expects Q3FY21 earnings for auto and auto ancillary to witness sequential growth, driven by healthy volume recovery and cost control measures. Overall, the brokerage is building a 16.7 per cent YoY growth in revenue for the auto firms under its coverage while profit after tax (PAT) and Ebitda are seen growing 16 per cent and 17.5 per cent YoY, respectively.
As regards margina, HDFC Securities expects it to be sequentially range-bound, largely owing to rise in commodity prices. "While utilisation levels are elevated (car, tractor utilisation is upwards of 80 per cent) and discounts are lower due to encouraging demand trends, commodity prices have risen sharply over the past quarter which will weigh on margins," it said.
Analysts at KIE sees Maruti Suzuki's Ebitda increasing by 27 per cent YoY in Q3FY21, led by 14 per cent YoY increase in revenues, driven mainly by volume growth.
Those at BoB Capital Markets
(BoB Caps), meanwhile, expect a 17 per cent YoY increase in Maruti's Q3 revenue led by higher volumes, although it is skeptical on the company's margins owing to sharp upswing in commodity prices.
Two-wheeler: In this segment, KIE expects Ebitda of Hero MotoCorp
to increase by 24 per cent YoY due to strong volume recovery (up 20 per cent YoY), resulting in higher profitability, partly offset by raw material cost pressures.
Bajaj Auto's Ebitda, on the other hand, is pegged to grow 18 per cent YoY as "strong growth in the export motorcycle segment (up 26 per cent YoY) will aid Ebitda margin". This, the brokerage says, will be partly offset by raw material cost pressures and negative impact of withdrawal of the export incentive scheme.
BoB Capital forecasts volume growth at around 20 per cent YoY for Hero MotoCorp
and TVS Motor and around 9 per cent for Bajaj Auto
and Eicher Motors.
The Ebitda margins for two-wheelers are, however, forecast to decline QoQ due to the rising commodity prices.
Commercial vehicle: Mahindra & Mahindra's Ebitda may increase by 38 per cent YoY for the quarter, led by 270 bps YoY improvement in Ebitda margin mainly due to a richer product mix, while Escorts may report a strong quarter due to 27 per cent YoY increase in tractor volumes and a richer product mix, Kotak IE noted.
"In the CV segment, MHCV volume declines moderated to around 8 per cent YoY on lower economic activity and uncertainty over the scrappage policy. But with a 19 per cent YoY jump in average realisation per unit (low base in Q3FY20 and BSVI transition cost), Ashok Leyland may report over 27 per cent YoY revenue growth," said the earnings preview report by BoB Capital.
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