As the auto industry of India enters the first quarter earnings season of FY26, the brokerage firm Jefferies in its latest report has highlighted a mix of optimism and caution about this sector. The brokerage has added Mahindra & Mahindra, TVS Motor Company, and Belrise Industries as its top picks.
Let’s take a look at why Jefferies remains upbeat on select auto names and where it expects the pressure to mount.
Jefferies on Autos & Auto Parts: Earnings growth slows, but strength remains
According to Jefferies, the overall growth momentum for auto OEMs (excluding Tata Motors) is expected to cool off in Q1FY26, with EBITDA and pre-exceptional PBT growth slowing to just 1-2% year-on-year. In contrast, Q4FY25 had posted growth between 9-11%.
However, the report pointed out that “there is a big growth divergence across OEMs.” While Mahindra & Mahindra (MM) and TVS Motor Company (TVSL) are projected to post EBITDA growth of 22-29% YoY, companies like Hyundai, Maruti Suzuki (MSIL), and Tata Motors (TTMT) may see a steep drop ranging from 10-28% YoY. Hero MotoCorp (HMCL) is likely to witness a 4% decline.
Jefferies on Autos & Auto Parts: Segment trends – Tractors up, PVs and two-wheelers lag
The brokerage further in its report noted a mixed wholesale volume trends across the auto industry. Tractor sales rose by 8% YoY during Q1, but segments like two-wheelers, passenger vehicles, and trucks recorded volume declines of 1-6% YoY.
The brokerage expects revenue for its coverage universe (excluding Tata Motors) to grow 7% YoY in Q1, driven by 12-25% YoY growth for Escorts Kubota (EIM), Mahindra & Mahindra, and TVS Motor Company.
For Tata Motors, JLR shipments (excluding its China JV) fell 11% YoY and were down 22% QoQ, further dampening prospects.
Jefferies on Autos & Auto Parts: Margins and profitability outlook
The brokerage estimates that EBITDA margins for covered OEMs (excluding Tata Motors) will shrink by 40 basis points sequentially to 13.7% in Q1FY26. Among component makers, Jefferies expects Belrise Industries to outperform with 13% YoY EBITDA growth, while Bharat Forge, Motherson, and Sona Comstar may report declines between 6-17%.
When it comes to bottom-line earnings, aggregate pre-exceptional PBT is forecast to grow just 1% YoY. Jefferies expects Mahindra & Mahindra, and TVS Motor Company to post 15-33% YoY growth, while Hyundai, Maruti Suzuki, and Tata Motors could see a sharp 9-24% fall in the same metric.
Top picks by the brokerage
Jefferies remains optimistic on the medium-term outlook for the auto sector.
“We see tailwinds from income tax cuts, easing liquidity, and PSU wage hikes in FY27,” added the brokerage in its report. It also pointed to auto stocks such as Mahindra & Mahindra, TVS Motor Company, and Belrise Industries as its top picks in this sector.