The auto industry continued to benefit from relatively healthy demand trends in the post-festive months, with a sharp sequential jump in the CV space being a particular highlight. Broad-based general positivity stayed intact as other segments (ex-3-W, buses) i.e. 2-W, PV and tractors, also performed well. For our auto and auto ancillary coverage universe, topline performance is expected to be robust in YoY terms amid double digit volume growth, BS-VI price hikes and base effect (Covid impacted Q4FY20). However, we expect the steep increase in commodity costs (metals, rubber, other crude derivatives & lead) over the past few months that did not come through in Q3FY21 financials to surface now. We expect our coverage universe (ex-Tata Motors) to report topline growth of 33% YoY (-1% QoQ) with EBITDA margins at 11.9% (down ~180 bps QoQ).
Upturn in user industries to aid ancillary performance
With a rebound in OEM sales adding to existing strength in aftermarket channel, ancillaries with high replacement exposure (battery, tyre players) are expected to do well in Q4FY21. Upturn in domestic & global CV cycle is seen lifting Bharat Forge's prospects while Minda Industries is expected to have benefited from a revival in key user industries, domestic 2-W, 4-W. Performance of key SMP subsidiary would be a monitorable for Motherson Sumi. Total topline growth for the auto ancillary pack is expected at 22.2% YoY, -3% QoQ amid ~160 bps QoQ decline in margin profile to 12.6%.
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_AutoAncillary_Q4FY21.pdf