Automobiles Q1 Results Preview - FY25 To Be A Healthy Quarter; Input Cost Pressures Surface: Motilal Oswal

Motilal Oswal Report

Auto original equipment manufacturers reported volume growth of ~10% YoY in Q1 FY25, with broad-based growth in almost all the segments. Two-wheelers outperformed with ~11% YoY growth, followed by passenger vehicles with 6% YoY growth. Commercial vehicle and tractors grew by 4% each. We expect a volume CAGR of 9%/6%/5% for two-wheelers/passenger vehicles/tractors over FY24-26. For three-wheelers/commercial vehicles, we anticipate a volume CAGR of 8%/7% over the same period.

Revenue/Ebitda/PAT for our coverage universe is expected to grow ~9%/14%/18% YoY during the quarter. Ebitda margin for our Auto OEM universe (excluding JLR) is expected to improve 170 bp YoY to 13.1% (stable QoQ), driven by moderate commodity costs, a favorable product mix and operating leverage.

For auto ancillaries, Ebitda margin is expected to largely remain stable YoY, but it may decline 70 bp QoQ.

We noted a rise in key commodity prices in Q1 FY25 QoQ, such as aluminum (+15%), copper (+16%), lead (+5%), rubber (+5%) and platinum (9%). We expect the impact of rising input costs to be visible from Q2 onwards.

Within OEMs, we expect two-wheeler OEMs (excluding Eicher) and Maruti Suzuki India Ltd. to outperform peers.

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