Original Equipment Manufacturers (OEM) under coverage are projecting notable growth in key financial metrics for the upcoming fiscal quarter, according to Axis Securities report.
This growth is anticipated to be driven by double-digit volume increases in two-wheelers (2Ws) and low to mid-single-digit growth in passenger vehicles (PVs) and tractors. This growth will be partially offset by a year-on-year decline in commercial vehicle (CV) volumes.
In the two-wheeler sector, EBITDA margins are expected to expand significantly, with TVS, Hero, and Bajaj projecting increases of 97, 57, and 52 basis points YoY, respectively. In contrast, Royal Enfield anticipates a slight dip of 2 basis points.
For the passenger vehicle segment, Maruti Suzuki is expected to see a marginal increase of 13 basis points in EBITDA margins, aided by a richer product mix and favourable forex conditions, despite facing some negative operating leverage challenges.
Conversely, Escorts Kubota anticipates a decline of approximately 17 basis points YoY in EBITDA margins, primarily due to negative operating leverage in its ECE and tractor segments.
Ashok Leyland’s margins are projected to remain flat YoY as it balances negative operating leverage and higher appraisal costs with effective cost-control measures and a greater mix of non-auto segments.
For the auto ancillary sector, revenue, EBITDA, and PAT are expected to grow by approximately 7 % , 8.5 % , and 10.5 % YoY in Q2 FY25.
Key players are set to report varied revenue outcomes. Endurance Technologies is expected to report a 12 % YoY growth in revenue due to improved two-wheeler production volumes and expansion in its ABS and alloy wheel divisions.
In contrast, Automotive Axles Ltd anticipates a 10 % YoY decline in revenue due to reduced MHCV truck sales attributed to Ashok Leyland. Minda Corp projects a 7 % YoY revenue increase, buoyed by growth in the two-wheeler sector, despite a downturn in CV volumes.
Meanwhile, Sansera Engineering expects to see a 12 % YoY revenue increase driven by strong performance in the two-wheeler and aerospace sectors.
The Q2 FY25 outlook reflects a positive trend in input costs, with average steel HRC prices softening by 5 % sequentially and declines in AL, copper, and lead prices ranging from 4 % to 15 % . These shifts are likely to have a beneficial impact on margins moving forward.
Despite the anticipated growth, the sector remains cautiously optimistic due to moderation from last year’s high base. The two-wheeler segment is expected to outperform the PV, CV, and tractor segments, supported by favourable monsoon conditions that have spurred rural demand and improved water reservoir levels.
Additionally, a recovery in exports is anticipated to play a crucial role in driving growth in the latter half of FY25.
