A healthy festive period and elements of pent-up demand, channel restocking led the auto industry to remain firmly on the recovery path in Q3FY21. PV, motorcycle and tractor segments continued to be buoyant, with a pick-up in truck and scooter sales a welcome development. While topline performance is consequently expected to be strong across our coverage universe, margins are seen contracting sequentially on the back of a sharp rise in key raw materials like metals, rubber & other crude derivatives. We expect I-direct coverage universe (Ex-Tata Motors) to report topline growth of 15.9% with EBITDA margins at 11.8% (down 150 bps QoQ) and PAT growth of 17.8% YoY. Including Tata Motors, coverage universe topline growth is seen 8% YoY to Rs. 1.65 lakh crore with corresponding margins at 11.6% (down 140 bps QoQ) and PAT de-growth of 10.7% YoY to Rs. 6,679 crore. OEM pack is seen leading the recovery.
Ancillaries - delivery to be more stock specific
In ancillaries, companies with high exposure to replacement channel (tyre & battery makers) are thought to have outperformed on the topline front. Companies with global exposure (Bharat Forge, Motherson Sumi) are expected to deliver relatively muted performance. Minda Industries and Balkrishna Industries are seen having done well courtesy a pick-up in demand from base industries (domestic 2-W, 4-W & global agri respectively), accompanied by comparatively healthy margin prints. Total topline and bottomline growth for the auto ancillary pack is expected at 10.1% YoY & 10.6% YoY, respectively, amid ~140 decline in margin profile.
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_AutoAncillary_Q3FY21.pdf