Q4 Results Preview: Auto companies to post stronger earnings led by PV, 2W/3W; TVS Motors, Tata Motors to lead the pack

The automobile sector is expected to witness a strong quarter, reporting a growth of over 15-30 per cent in EBITDA led by passenger vehicle (PV), two-wheeler (2W) and three-wheeler (3W) companies, according to analysts.

Q4 production has likely improved sequentially for PVs, 2Ws, CVs, while possibly declining for tractor in Q4E, according to brokerage firm Elara Capital.

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According to the brokerage firm report, 2W production to surge 3% quarter-to-quarter (QoQ) (+29% YoY) and PV production by 20% QoQ (+12% YoY). Also, MHCV production may likely improve 4% QoQ (-11% YoY).

In 4QFY24, 2W industry volume expanded by ~26% YoY, on the back of consistent demand in domestic market as well as recovery in international markets. The PV industry registered a growth of 13% year-on-year (YoY) mainly due to consistent saliency in SUVs.

“Expect ASPsto improve QoQ sharply for Bajaj Auto, Hero MotoCorp and Eicher Motors led by enhancing product and export mix. However, in Bajaj’s case the impact of higher ASPs on a QoQ basis will be partially offset by higher EV volumes which is margin dilutive. MSIL’s margin may see a sharp 140bps QoQ improvement led by operating leverage,” the report added.

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The month of March was a mixed bag for the auto sector as 2Ws like Bajaj and TVS have excelled, while Hero has underperformed despite being in the same sector. the month of March was a mixed bag for the auto sector as 2Ws like Bajaj and TVS have excelled, while Hero has underperformed despite being in the same sector. On the other hand, MSIL has posted growth of 10 per cent, while M&M’s Auto segment has posted 3.5 per cent growth. Tractors have fallen by and large around 20 per cent average, while CVs have fallen around 6-11 per cent. Exports seem to have bounced back in March with a strong 40 per cent and 25 per cent growth for Bajaj and TVS 2Ws respectively, as per Auto-roundup report by brokerage firm LKP.

Company-wise expected Q4 numbers

Maruti Suzuki India Limited (MSIL)

MSIL plans to launch its first model in FY25. Brokerage firm Prabhudas Lilladher expects its revenue/EBITDA/PAT to grow at a CAGR of 10.2 per cent/16.4 per cent/13.5 per cent respectively.

The brokerage firm maintained “Buy” with a target price of ₹14,350, assigning it a PEx of 26x on its FY26E EPS.

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Mahindra & Mahindra (M&M)

MM is expected to benefit from its production ramp up which shall result in fulfillment of orders at a better pace, new launches in EV segment as well as refresher of the existing models, better forecast of rainfall which shall aid in FES volume expansion.

Factoring this, the brokerage firm estimate its revenue/EBITDA/PAT to grow at a CAGR of 11.7%/17%/13.4% respectively and revise our TP on SOTP valuation with a target price of ₹2,306 with ₹221 per share for its EV business.

Tata Motors

The brokerage firm expects its revenue to grow by 17.3 per cent YoY, driven by healthy volume growth across its segments. Similarly, higher mix of UV and consistent performance in JLR to drive EBITDA margin expansion of 183bps YoY. PAT is expected grow by 9.7 per cent YoY.

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Hero Motocorp

The firm estimates its revenue to grow by 12.6 per cent YoY due to 9.6 per cent YoY growth in its volume and highe ASP. Improved product mix clubbed with stable raw material price to result in EBITDA margin expansion by 114bps YoY. Consequently, PAT to grow by 20.2 per cent YoY.

TVS Motor

The company is expected to post a built-in revenue expansion of 21.5 per cent YoY aided by volume growth of 22.4 per cent YoY. Product improvement, export volume outpacing domestic growth and softer commodity prices is expected to result in 98bps YoY EBITDA margin growth. We expect PAT to grow by 31.3 per cent YoY.