Automotive players are expected to report healthy year-on-year top line growth in the second quarter ended September 30, 2010, while their margins may witness pressure on the back of higher input costs.

Fears of price increase due to the increase in raw-material costs and change in emission norms resulted in advanced buying, perking up vehicle volumes in the second quarter. Revenue growth in the auto sector is expected to led by commercial vehicle majors Tata Motors, Ashok Leyland, Bajaj Auto and TVS Motors as they witnessed strong recovery in volumes.

?Inputs costs have spiraled in the last six months, following the spurt in steel, rubber and aluminum prices. Further, owing to change in emission norms, production cost per vehicle for most of the industry players has been increasing. Thus the margin of our auto universe is expected to contract substantially by around 450 bps to reflect higher input costs. All these factors combined would result in an 8% year-on-year decline in earnings,? said analysts Vaishali Jajoo and Yaresh Kothari of Angel Broking in a report.

Angel?s coverage include companies like Maruti, M&M, Ashok Leyland, Tata Motors. Bajaj, Hero Honda, and TVS. Angel predicts that, on an average, the companies under its watch would post around 31% growth in revenue.

According to Angel?s estimation, net sales of Ashok Leyland will touch Rs 2,559 crore, Bajaj Rs 3,940 crore, Hero Honda Rs 4,435 crore, Maruti Rs 8,781 crore, M&M Rs 5,351 crore, Tata Motors Rs 11,314 crore and TVS Rs 1,573 crore.

On year-on-year basis, analysts said that price of steel and aluminium increased by around 15-25% while rubber prices surged by around 70%.

Although average international crude oil prices remained more or less stable throughout the quarter, hike in domestic petrol and diesel prices increased the cost of other key materials and transportation for all the companies, the analysts added.

Another brokerage firm Motilal Oswal said in its report that the combined growth in net profit and turnover of five companies under its watch is expected to be in the range of 87% and 27.3% respectively.

Although margins are expected to decline from the peak levels of second and third quarter in the last fiscal, the brokerage firm said that the impact would be partly offset due to higher operating leverage and partial passing on of cost increase by auto makers. Motilal Oswal keeps track the auto firms such as Maruti, Bajaj, Hero Honda, M&M and Tata Motors.

During the quarter, Tata Motors vehicle sales increased by 31.9% to 1.98 lakh units while Ashok Leyland’s surged by 56% to 22,240 units. Sales volumes of Maruti climbed by 27% to 3.13 lakh units while Mahindra and Mahindra (M&M) reported a growth of 21% at 1.37 lakh units. Bajaj sales jumped by 42% to 9.73 lakh units while TVS sales surged by 33% to 5.24 units and Hero Honda reported a growth of 9% at 12.85 lakh units.

The auto index registered 14.5% jump during the second quarter in line with the Sensex. Sentiment for auto stocks had turned positive in the last fiscal and the positive upturn in volume continued in the first half of the current financial year.