Auto Q2 Earnings Preview: TVS, Bajaj, M&M Likely Winners; Tata Motors Set To Take A Hit

Second quarter earnings of the current financial year will show a divergent trend in the automobile space with two wheeler companies expected to show strong growth for most players while M&M is expected to be a key winner within the passenger car segment.

The earnings to watch out for will however be Tata Motors, which is expected to see the biggest drag. Meanwhile, recovery for commercial vehicle and tractor makers is expected to hit first gear.

The two-wheeler companies are expected to continue their strong performance from the first quarter led by a continuation in sales growth and cost control. A higher share of premium bikes is another key reason aiding profitability. TVS and Bajaj Auto are expected to be notable winners in quarter two with TVS reporting 14% volume growth while Bajaj Auto has seen 15% growth in sales. Margins for most players will come in strong this quarter.

There is a notable pickup in profitability, especially for TVS Motors. Bajaj has maintained their margins at 20% odd levels despite a lower share of exports. EBITDA margins for Hero and Eicher are at maintainable levels and expect a better performance in the second half of the fiscal year for both these players.

Passenger vehicle makers, including M&M and Maruti, are likely to report mixed numbers for the quarter under consideration, with M&M continuing its growth in EBITDA margins. While revenue growth has slowed for the company, this is also on a decent base and newer launches at attractive price points. This quarter was the first full quarter of 3XO and towards the end, the introductory prices had been removed which should aid revenue and margin growth in the next quarter.

Maruti Suzuki is likely to report fall in EBITDA and profits led by negligible growth in sales in this quarter.

Absolute numbers show strong PV performance for M&M led by 18% growth in sales in Q2. Maruti reported 2% fall in sales in Q2 that in turn means flat numbers for the company.

While brokerages expect lower growth for Maruti, it is expected to be an exceptionally weak quarter for Tata Motors, mainly led by the passenger vehicle division of the company. Nomura expects a 75% fall in profits for PV division while Motilal Oswal sees a 94% fall in profits.

This is led by twin factors of higher inventory and higher discounts offered by the company this quarter. Their business update suggests a 6% fall in sales in during this period.

The commercial vehicle industry has seen a weak quarter and the same will be reflected in Tata Motors' numbers as well. Sales fell 20% for Tata Motors dragging its financials as well.

A poor show in quarter two puts immense pressure on the second half to deliver growth for FY25 for Tata Motors.

JLR division volumes are expected to see 4% YoY decline due to supply challenges. Production fell due to aluminium supply disruptions reported in Q1 this year but solace is that the company has said that production, wholesale volumes are expected to recover strongly in H2. This is key as we have seen global companies like BMW, Mercedes and Aston Martin cut guidance for this year and all these players expect to report lower sales this year compared to last year.

In the backdrop of this if JLR is expecting to report better H2 performance that augurs well for the company.

Ashok Leyland will follow Tata's CV performance and is expected to report a fall in revenue and EBITDA. The company reported a 8% fall in sales. When compared to Tata Motors, the fall was lower and that leaves some saving grace for reporting atleast a 4-5% growth in sales for Ashok Leyland.

Escorts had seen a flat Q1 and is expected to show better performance in Q2. While volumes for peer Mahindra for tractors were lower, a 2% growth augurs well for a better H2 for the company.