India Auto-Component Outlook Improves as Earnings Momentum Strengthens

Jefferies expects India’s auto-component companies to perform well.

These companies make parts used by vehicle manufacturers.

In the June quarter, their sales grew more slowly than those of auto makers.

However, their operating profits grew faster.

Their profit margins also stayed mostly steady even as commodity prices increased.

Auto makers saw their margins decline, especially in passenger vehicles.

Analysts became more positive about the companies’ future earnings in the September quarter.

Jefferies said stronger profits, stable margins and expanding business opportunities could support the sector.

The main caution is that many of these companies are already valued above their usual long-term levels.