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Nuvama Favors Auto Stocks Ahead of Q2 Results
Nuvama, a brokerage, thinks many auto companies could do well in the coming results season.
It expects sales revenue to rise because more vehicles were sold and some companies raised prices.
Passenger-car, commercial-vehicle and two-wheeler sales all grew in the quarter.
But making vehicles may cost more because materials, wages and shipping are more expensive.
That could mean profits grow more slowly than sales.
Nuvama likes several companies, including Eicher Motors, Hyundai Motor India and Tata Motors Passenger Vehicles.
It expects some companies to have stronger profit growth than others.
The rupee’s fall may help companies that sell a lot overseas.
Nuvama remains positive on autos, naming Hyundai Motor India, Tata Motors Passenger Vehicles and Eicher Motors among its top picks.
The brokerage expects coverage-wide revenue, excluding Tata Motors Passenger Vehicles, to grow 27% year-on-year in the September quarter.
Aggregate EBITDA growth is forecast at 10%, as commodity, wage and freight costs pressure margins.
Domestic passenger vehicle volumes rose about 30% year-on-year, commercial vehicles 28%, and two-wheelers 15%; two-wheeler exports rose about 27%.
Nuvama expects strong EBITDA growth from several automakers and suppliers, but forecasts double-digit declines at Hyundai Motor India, Apollo Tyres and CEAT.
- Who
- Nuvama Institutional Equities and the auto companies in its coverage.
- What
- Nuvama issued its outlook and stock preferences ahead of auto-sector Q2 results.
- Where
- India, across domestic vehicle markets and companies with export exposure.
- When
- For the September quarter of FY27.
- Why
- The outlook cites healthy demand, vehicle launches, pricing and valuations as supports, while warning that rising costs may pressure margins.
Key facts
- Nuvama's aggregate revenue forecast
- 27% year-on-year growth across its coverage, excluding Tata Motors Passenger Vehicles.
- Nuvama's aggregate EBITDA forecast
- 10% year-on-year growth.
- Passenger vehicle volume growth
- About 30% year-on-year domestically; exports declined marginally.
- Commercial vehicle volume growth
- About 28% year-on-year domestically.
- Two-wheeler volume growth
- About 15% domestically and about 27% for exports.
- Top picks cited
- Hyundai Motor India, Tata Motors Passenger Vehicles, Eicher Motors, Samvardhana Motherson International, Minda Corporation, Motherson Wiring India and ASK Automotive.
- Expected cost pressures
- Higher commodity prices, wage inflation and freight costs.
Sources
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