With the fiscal fourth quarter earnings season having kickstarted and major IT services companies already having announced their Q4 results, this week will see the auto sector starting to report its numbers. Maruti Suzuki India is scheduled to announce its Q4FY25 numbers on April 25 (Friday). According to brokerage firms, volume growth in Q4 will likely remain modest across segments, except for tractors and 2Ws which outshined in the quarter in review. Nuvama said, “The sales trajectory is positive for rural-focused segments such as tractors and 2Ws, and it still has a long way to go. Q4FY25 demand momentum has been positive—we forecast 10 per cent YoY growth in both revenue and EBITDA for our automobiles coverage (ex-TTMT). In Q4FY25, we estimate strong profitability for TVSL, MM, EIM, AL and SAMIL. In contrast, subdued profitability is likely for tyre/battery companies, TTMT, SONA and BHFC.”
Nomura, meanwhile, said that HYUNDAI, TVS, MSUMI may surprise positively, while MM, TTMT could miss estimates.
Tractor/2Ws to outshine in Q4
Analysts said that volume growth of the automobile industry is expected to remain modest across segments, except for tractors which outshined in Q4, supported by benign customer sentiments and early commencement of the festive period. Nuvama said, “We believe tractor/2W are better positioned, with volumes likely to grow in high-single digits over FY25–27E versus low-single digits for PV/CV. We prefer companies with higher domestic exposure and market share gainers. Domestic tractor volumes grew approximately 17 per cent YoY.” Per the analysis report, revenue shall expand 18 per cent YoY for MM’s farm division and 16 per cent for ESCORTS, to be aided by amalgamation with Kubota Agri Machinery and Escorts Kubota India entities.
Domestic 2W volumes, it added, inched up YoY (1 per cent YoY) while exports have surged by around 23 per cent. “We reckon Q4 revenue growth shall be robust for market share gainers such as EIM RE at 23 per cent and TVSL at 15per cent. In contrast, BJAUT/HMCL shall grow 6 per cent/ 2 per cent.”
PV and CV status check
According to Nuvama, domestic PV industry volumes grew by approximately 2 per cent YoY. MM’s auto division is likely to report strong revenue growth of 23 per cent YoY, followed by MSIL with 7 per cent while TTMT’s PV division will clock a 2 per cent decline. Further, domestic CV industry volumes were flat YoY. Nuvama said, “Volume performance has been muted led by selective financing by lenders and reasonable levels of fleet utilisation. We expect revenue growth of 10 per cent for AL with a 4 per cent decline for TTMT’s CV division.”
Ancillaries status check
Per Nuvama, revenue growth for ancillaries is expected to be a mixed bag. “MSUMI/UNOMINDA are likely to outperform with growth of 19 per cent/ 16 per cent YoY while SONA/BHFC/BIL shall underperform with a decline of 4 per cent/ 3 per cent/ 3 per cent,” it said.
OEMs status check
Nomura said that its domestic volume assumptions for domestic OEMs could have around 5 per cent downside risk from US tariffs, but this seems to be priced in for most stocks now. “There could be tailwinds such as lower interest rates, lower income taxes and potential cuts in oil prices, which should limit the downside risks, in our view. Any fall in commodities may also offer earnings support,” it said.
The brokerage firm said that the lower commodity costs can support margins but could be offset by the discounts push. “In 4QFY25F, for the OEMs in our coverage universe (excluding Jaguar Land Rover; unlisted), we estimate cumulative revenue to be up 7 per cent YoY and EBITDA up 6 per cent YoY. We expect EBITDA margin to decline marginally by ~10bp QoQ to 13.3 per cent. In the case of JLR, cost reduction initiatives and higher volumes QoQ should partly offset the weaker mix, leading to an EBIT margin of 9.8 per cent (vs 9.0 per cent in Q3FY25),” Nomura said.
Key expectations and monitorables for major auto players
Maruti Suzuki India: Nuvama said that the volume growth and higher realisation shall support revenue growth YoY. EBITDA margin is expected to contract slightly on higher other expenses (Auto expo and E-vitara launch). Key things to watch out for are demand outlook and new product timeline.
Tata Motors: Per Nuvama, revenue is expected to be flat YoY. EBITDA margin, it added, shall contract, despite improvement in India CV/PV margin, owing to lower JLR margin. Key thing to watch out for is JLR demand and margin outlook.
Hero Motocorp: Nuvam estimates revenue growth YoY to be supported by an increase in realisation. EBITDA margin shall contract due to higher marketing spends (Auto expo and product launches). It further added that the key things to watch out for are demand outlook and timeline of new launches.
TVS Motors: Per Nuvama, volume growth shall support revenue growth YoY. EBITDA margin shall expand on higher gross margin, owing to receipt of PLI incentives, favourable regional mix and benign currency. Key things to watch out for are e-mobility initiatives and demand outlook.
Mahindra & Mahindra: Per the analysis report by Nivama, robust revenue growth shall be supported by an increase in auto/farm volumes and better realisation. The EBITDA margin shall expand on better margins in the tractor segment. Key things to watch out for are demand outlook for tractors and passenger vehicles.
Ashok Leyland: Per Nuvama, revenue is anticipated to grow in double-digit YoY on volume growth and better product mix. EBITDA margin shall expand on pricing discipline and cost savings. Key thing to watch out for is CV demand outlook.
Eicher Motors: Nuvama said that a robust volume will support revenue growth YoY. EBITDA margin shall contract on lower gross margin and higher marketing spends. Key things to watch out for are demand outlook for existing key models.
Uno Minda: Nuvama said that the revenue growth YoY will be supported by strong growth in switches, casting, lighting and other (Sensors, and EV parts) segments. EBITDA margin is expected to contract on lower gross margin (high base last year due to receipt of price revisions). Key thing to watch out for is order-book additions and EV share in revenue.