Competition pressurises auto companies

Written by Vrishti Beniwal | New Delhi, Jan 23 | Updated: Jan 24 2008, 07:04am hrs
Tata Motors, Indias largest automobile company by sales, is expected to post a sharp 18.86% drop in net profit for the quarter ended December 31, compared with the same quarter last year, as sluggish commercial vehicle sales and unfavourable product mix hurt its operating margins. It is expected to report Q3 net profit at Rs 416.6 crore on a 4.1% rise in revenue to Rs 7,285.7 crore, as per average of five analysts estimate.

Other automobile companies are also expected to post disappointing results reflecting weak growth in sales of trucks, two wheelers and tractors, says Merrill Lynch. Operating margins are expected to remain under pressure on higher input costs and intensifying competition, says Angel Broking.

Ashok Leyland is estimated to post a 19.12% fall in net profit and 1.04% drop in revenue on-year. Lower volume sales during the quarter are likely to keep profit muted on on-year basis, says Religare Securities. It, however, expects Ebitda margin to improve to 10.3% on-quarter due to a favourable product mix.

Maruti Suzuki, however, is expected to witness robust 23.86% on-year growth in net profit and 29.56% growth in revenue during the quarter on strong passenger car sales. Higher volume growth and a richer product mix would support a continued strong performance, says Religare. The company, though, could disappoint on margins, given the discounts offered and higher input costs. Mahindra & Mahindra is likely to register flat profits with a 3.62% on-year growth on good volume in light commercial vehicles, flat demand for tractors and disappointing volume of Logan car. Kotak Securites expects operating margin to improve marginally on account of higher realisation.

Bajaj Auto may post moderate net profit growth of 5% on-year on decline in volumes in both two-wheeler and three-wheeler sales. Hero Honda, on the other hand, could spring up positive surprise with 13.4% year-on-year rise in net profit and 4.26% rise in revenue due to larger proportion of high-end bikes in overall sales during the quarter.