Auto shares to purchase after brokerage anticipates robust progress in Q4FY24; Do you maintain any? 

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Prabhudas Lilladher is a pre-eminent brokerage home within the Indian monetary market, identified for its sturdy database and progressive funding concepts. The agency gives a spread of economic services, together with fairness, choices, futures, commodities, forex choices, and forex futures. 

As per Prabhudas Lilladher’s report, Within the fourth quarter of FY24, the two-wheeler (2W) trade skilled a sturdy 26% year-on-year growth pushed by sustained home demand and a rebound in worldwide markets. 

Concurrently, the passenger car (PV) sector achieved a 13% YoY progress, primarily fueled by the constant recognition of SUVs. Mahindra & Mahindra (MM) witnessed a noteworthy 120bps market share improve, contrasting with Maruti Suzuki’s comparatively steady market share (-10bps YoY). 

Nonetheless, the tractor trade confronted a big downturn of roughly 20% YoY attributable to adversarial climate circumstances, notably erratic monsoons and depleted water reservoirs, which negatively impacted agricultural sentiment in central and southern areas, thus hampering total gross sales. 

Regardless of this, three-wheeler (3W) quantity continued its upward trajectory, recording a ten% YoY progress, though the tempo moderated considerably as a result of affect of a excessive base impact. Conversely, business car (CV) quantity declined by round 4% YoY, attributed to slower authorities undertaking implementations previous elections and a excessive base comparability. Prabhudas Lilladher reported. 

Within the fourth quarter of fiscal yr 2024, the brokerage foresees sturdy progress in income and EBITDA at 15.5% and 31% YoY, respectively, throughout the automotive sector, primarily pushed by Passenger Automobiles and 2W/3W corporations sustaining robust volumes. 

The brokerage reported that the car sector is predicted to carry out properly attributable to benign commodity costs aiding margin growth, with the commodity index down by 1% QoQ and ~11% YoY, persevering with to help margins in Q4FY24 and 1QFY25. 

Amongst key commodities, Metal costs declined by ~2.7% QoQ, adopted by Pig Iron/Zinc/Lead costs down by ~2.4%/1.5%/1.6% QoQ respectively. General, costs of uncooked materialss have largely remained favorable, whereas robust quantity progress for corporations might end in higher working leverage, resulting in an EBITDA margin growth of 165 foundation factors YoY. 

The brokerage has adjusted FY24-26E earnings within the vary of -4% to +10% to account for quarterly volumes, benign commodity prices and foreign exchange, change in combine, better-than-expected demand for PVs, and lower-than-expected volumes in some segments. 

OEM income is projected to rise by ~14% YoY (excluding JLR), led by 2Ws, 3Ws, and PV. Notably, Bajaj Auto/TVS (~25% YoY/21% YoY) and Maruti Suzuki India Ltd (~21% YoY) are anticipated to exhibit robust progress. Ashok Leyland Ltd. may expertise a slight YoY income decline of ~2% in CVs however vital QoQ progress of ~22%.Brokerage reported. 

The brokerage has initiated goal costs for vehicle shares, particularly throughout the two-wheeler and passenger car segments. 

Maruti Suzuki India Ltd 

Prabhudas Lilladher has adjusted the goal worth for Maruti Suzuki India Ltd from ₹12,200 to ₹14,350, reflecting a 14 potential improve from the present market worth. Analysts anticipate a 21.2% year-on-year and 16% quarter-on-quarter progress in Maruti Suzuki’s income, attributed to a 13.4% year-on-year and 16.5% quarter-on-quarter growth in quantity. 

The proportion of utility Automobiles (UVs) within the gross sales combine rose from 26% within the fourth quarter of FY23 to 36.7% within the fourth quarter of FY24, possible supporting an EBITDA margin improve of 223 foundation factors year-on-year and 95 foundation factors quarter-on-quarter. Because of this, Revenue After Tax (PAT) might witness a 48% year-on-year and 24.1% quarter-on-quarter progress.

Mahindra & Mahindra Ltd 

The brokerage has set a goal of ₹2,306 for Mahindra & Mahindra Ltd, representing an 11% upside from the present market worth.

They anticipate an 8.1% year-on-year progress in income, primarily fueled by a 13.8% quantity improve within the Automotive division.Regardless of the anticipated decline in Tractor quantity, it’s projected to offset the advantage of decreased uncooked materials prices, leading to a comparatively steady EBITDA margin. Nonetheless, the brokerage foresees a 4.3% year-on-year decline within the firm’s web revenue after tax (PAT). 

Tata Motors Ltd 

The brokerage has initiated the goal on Tata Motor for a worth of ₹1,080 with an upside of seven % from the present market worth. 

The brokerage anticipates Tata Motors’ income to extend by 17.3% yr over yr (YoY), propelled by sturdy quantity progress throughout its segments. Moreover, they anticipate the corporate to expertise an growth in EBITDA margin by 183 foundation factors YoY, pushed by the next mixture of utility autos and constant efficiency in JLR. Moreover, the brokerage foresees a 9.7% YoY progress within the firm’s revenue after tax (PAT). 

Hero MotoCorp Ltd 

Prabhudas Lilladher has initiated the goal worth for Hero MotoCorp Ltd to ₹5,070, reflecting a 12% potential improve from the present market worth.

Analysts anticipate a 12.6% year-on-year income progress pushed by a 9.6% quantity improve and better common promoting costs. With an enhanced product combine and steady uncooked materials prices, the corporate is predicted to increase its EBITDA margin by 114 foundation factors year-on-year, resulting in a projected 20.2% year-on-year progress in revenue after tax (PAT). 

Ashok Leyland Ltd 

Brokerage has initiated a goal worth on inventory for a worth of ₹210, reflecting a possible 17% improve from the present market worth. The brokerage forecasts a 2.4% year-on-year decline in income attributable to a 5.7% lower in quantity, attributed to a excessive base and election-related slowdown. 

Regardless of the amount decline, cost-cutting measures and decrease uncooked materials prices, brokerage anticipated to drive a 227 foundation factors year-on-year growth in EBITDA margin. Revenue after tax is predicted to develop by 27.2% year-on-year. 

TVS Motor Firm Ltd 

The brokerage maintains a ‘HOLD’ ranking on TVS Motor Firm Ltd with a goal worth of ₹ 1,995. They anticipate a income growth of 21.5% YoY pushed by a quantity progress of twenty-two.4% YoY. 

The anticipated components contributing to this progress embody product enhancements, export volumes surpassing home progress, and favorable commodity costs, that are anticipated to result in a 98bps YoY improve in EBITDA margin. Moreover, the brokerage predicts a PAT progress of 31.3% YoY. 

Written by Omkar Chitnis

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