Mumbai: India’s auto parts firms will see revenues and earnings falling in the January-March quarter, hurt by slowing demand at home and a bleak overseas market.
“Broadly, the sector is expected to deliver muted earnings owing to exaggerated losses in some of the medium to small ancillary companies,” Angel Broking said in a report.
“Amtek Auto and Bharat Forge could surprise on the declining side... owing to large business exposure in the US and European markets,” the brokerage said.
India’s auto ancillary industry is among the worst hit sectors as it struggles with the current slowdown in the auto original equipment makers (OEM) segment and a bleak outlook in the export markets, Prabhudas Lilladher said in a note.
Bharat Forge, Motherson Sumi and Amtek Auto will see profits slumping 40% to 80%, with only Exide Industries bucking the trend and posting a rise, a Reuters poll of brokerages showed.
“In the domestic sector, firms with higher exposure to the embattled commercial vehicle segment will fare worse than those supplying the bulk of their products to the passenger car market, an analyst who declined to be named said.
Bharat Forge and Amtek have a substantial exposure to the domestic commercial market which is grappling with a fall in demand, the analyst said.
Bharat Forge sales will also be hit as it gets more than half its revenues from the US and Europe where the OEM market has been hammered by the ongoing recession, he added.
A decline in commodity prices did not benefit Bharat Forge as it was passed on to customers due to pass-through contracts with them, ICICI Securities said in a note.
Motherson Sumi will also see a fall in revenue but will fare relatively better due to a diversified geographical presence across Europe and the West Asia and a greater exposure to the domestic passenger car market, analysts said.
Car sales rose 1% on year to 129,358 units in March, helped by cheaper credit, government stimulus measures and rural demand, data from the Society of Automobile Manufacturers showed. Sales of trucks and buses fell 26.2% on year to 41,881 units in March.
Bharat Forge’s profit is expected to fall 77.09% to Rs189.83 million.
Amtek Auto’s January-March consolidated net profit is seen falling 88.2% to Rs159.5 million, while Motherson Sumi’s consolidated profit is likely drop 42.97% to Rs352.5 million.
However, Exide is expected to post a modest growth in fourth quarter profit aided by robust return from the battery replacement market and a fall in raw material prices, Angel Broking analyst Vaishali Jajoo said.
“The replacement market will support the growth better as OEMs are not doing well,” she said.
Exide Industries’ profit is seen rising 8.14% at Rs679.33 million.