Auto Sector Q1 Results Review - Growth In Two-Wheeler OEMs Led By Rural Demand: Axis Securities

Axis Securities Report

Auto OEM

The companies under our coverage reported revenue/Ebitda/PAT growth of 11%/30%/28% YoY, surpassing expectations of 10%/24%/21%. This performance was driven by higher average selling prices, better sales volumes, the premiumisation trend, cost optimisation efforts, and operating leverage.

On a QoQ basis, aggregate revenue/Ebitda/PAT declined by 4.5% / 4.2%/2.2%, against expectations of ~6%/9%/7% declines due to seasonality. The YoY growth in Ebitda was largely attributed to cost optimisation efforts and stable commodity prices, as observed in Hero Motocorp, Bajaj Auto, Eicher Ltd, TVS Motors, Maruti, and Ashok Leyland.

Ebitda margins expanded by 207 basis points/2 bps YoY/QoQ. The YoY margin expansion was driven by higher ASPs (due to product premiumization), cost control efforts, and largely stable raw material input costs.

Auto Ancillaries Review – Long-term Growth Drivers Intact

The companies under our coverage reported revenue/Ebitda/PAT growth of 11%/10%/12% YoY, exceeding expectations of 9%/9%/8%. This growth was primarily driven by the premiumization trend in two-wheelers and passenger vehicles, stable raw material prices, and cost control efforts across auto ancillaries.

Sansera Engineering, Endurance Technologies, UNO Minda, and Minda Corp reported strong YoY growth in Ebitda, while CIE Automotive and Steel Strip Wheel were flat. Automotive Axles experienced a 17% YoY decline due to reduced volumes in the CV industry trucking segment.

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