Kotak sees strong quarter from Maruti Suzuki, Tata Motors, says auto firms profit may rise 38%

We expect a strong quarter for automobile companies in our coverage universe led by strong demand as manufacturers push inventory ahead of the festive season. We estimate a 38% y-o-y increase in net profit for auto companies in our coverage universe, largely led by a sharp improvement in consolidated profit of Tata Motors from a low base. We expect a strong quarter, particularly from Maruti Suzuki, Tata Motors, Hero Motocorp, TVS Motor and Eicher Motors.

Amara Raja Batteries. We reckon the company will report 17% yoy revenue growth in the automotive four-wheeler replacement segment and improve its market share. Ashok Leyland. We expect EBITDA to decline by 19% y-o-y led by a 150 bps y-o-y decline in EBITDA margin and 10% y-o-y decline in volumes.
Bajaj Auto. We expect ASPs to improve by 2% q-o-q led by higher share of premium motorcycles and export three-wheelers.

Bharat Forge. We expect standalone revenues to decline by 19% y-o-y in Q2FY17 led by a steep decline in oil & gas and North America truck segments. Eicher Motors. We expect consolidated net profit to increase by 73% y-o-y in Q2FY17 led by 31% yoy growth in Royal Enfield volumes.

Exide Industries. We expect revenues to increase by 8% y-o-y due to 10% y-o-y improvement in automotive replacement revenues. Hero MotoCorp. We expect EBITDA margin to improve by 30 bps q-o-q to 16.9% in Q2FY17 due to operating leverage benefits.