Auto Q3 FY26 preview: Brokerages see strong earnings growth amid recovery in sales; list top picks

A sharp recovery in sales, a richer product mix, and stable commodity inflation, will help Indian automakers post a strong performance in the December quarter, analysts tracking the sector have forecast—projecting most companies will post double-digit net profit growth.

India is among the top global automobile markets with sub-sectors such as motorbikes and tractors the largest in the world by volume sales.

Based on their projection, two of three brokerages Mint has covered in this story said they favoured Maruti Suzuki, Eicher Motors, Bajaj Auto, and Mahindra & Mahindra based on the projected share performance.

Following a rationalisation of goods and service tax (GST) late in September, demand picked up across automobile segments and has sustained momentum even after the Navratri to Diwali festive season. Significantly, demand for entry-level vehicles across both two-wheelers (2Ws) and passenger vehicles (PVs) has seen a pickup, making these models more affordable for budget-conscious buyers.

Further, wholesale was strong in December as companies continued to push demand with healthy discounts to sustain growth momentum, helping the sector close the quarter with robust sales growth.

Motilal Oswal sees strong earnings growth

Motilal Oswal expects its auto original equipment manufacturer (OEM) coverage universe (excluding Jaguar Land Rover, part of the Tata Motors) to post a 27% YoY growth in net profit, noting that all companies (excluding JLR) are likely to clock healthy double-digit earnings growth, with the lowest growth seen at 13% for carmaker Hyundai Motor and the highest at 62% for TVS Motor Company.

The brokerage noted that while input costs may rise slightly on a QoQ basis due to higher precious metal prices, this impact is expected to be partially offset by easing steel prices, operating leverage benefits and moderation in discounts.

It estimates that the aggregate Ebitda margin for its OEM coverage universe is likely to rise marginally by 30 basis points YoY to 13.5%. Ebitda, short for earnings before interest, tax, depreciation, and amortisation, is a key metric for operating profits, especially in the manufacturing sector.

“The key is that none of the auto OEMs are expected to see any meaningful margin decline on a YoY basis. As a result, we expect OEM companies (ex-JLR) under our coverage to record a strong 27% growth each in EBITDA and PAT,” the brokerage said.

Axis Direct projects revenue, Ebitda, and PAT for the OEMs it covers to grow by 26%, 30%, and 28% YoY, respectively, driven by GST cuts, stable commodity inflation, and favourable regulatory norms.

The brokerage expects YoY Ebitda margins to improve due to a richer product mix (higher exports) and price hikes taken over the past year, which it expects to be partly offset by higher discounts and advertisement expenses.

As a result, Axis estimates its coverage universe to report stable to slightly improving margin trends YoY on an aggregate basis, supported by a better product mix and price hikes implemented over the past year.

On a sequential basis, it estimates that revenue, Ebitda, and PAT growth for Q3FY26 are expected to rise by 11.5%, 16.0%, and 17.3%, respectively, along with an expansion of over 56 basis points in Ebitda margin.

Meanwhile, Choice Institutional Equities also expects a strong performance, with OEMs under its coverage (excluding Tata Motors) projected to deliver aggregate revenue, Ebitda, and PAT growth of 25.4%, 23.6%, and 24.1% YoY, respectively.

The growth is driven by a surge in demand, supported by GST rate changes and post-festive season momentum.

Brokerages’ top auto picks

Brokerages, in their review reports, also shared their stock preferences. Axis remains bullish on Maruti Suzuki, Eicher Motors, and Bajaj Auto.

Motilal Oswal has also favoured Maruti Suzuki as its top pick among auto OEMs, citing the company’s new launches and strong export momentum, which are expected to drive healthy earnings growth. It has also preferred Mahindra & Mahindra, supported by an uptrend in tractor demand and robust growth in the utility vehicle segment.

Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.