Auto Sector Q3 Results Preview: Expect modest revenue, profit growth, stable margins for OEMs; Maruti, Hyundai top picks

The Indian automobile sector is projected to deliver a mixed performance in the third quarter of FY25, as the festive season appears to have fallen short in reviving overall demand. Auto OEMs are anticipated to report a modest 6% year-on-year (YoY) volume growth for the quarter ended December 2024, despite the festive period.

Two-wheeler demand remained subdued during the quarter ended December 2024, contrasting with the Passenger Vehicle (PV) segment, which experienced a stronger demand uptick driven by festive season sales. Tractor demand witnessed a notable revival in the quarter, signaling improving rural sentiment. However, the Commercial Vehicle (CV) segment continued to face sluggish demand, reflecting persistent challenges in the category, analysts said.

“The incremental worrying factor is that the two-wheeler segment, which had been the key growth driver for the Auto sector in H1FY25, saw a marked slowdown in Q3. The four listed two-wheeler OEMs have posted flat growth YoY in domestic 2W sales in Q3 (vs. 15% growth in 1H). The only silver lining for 2W OEMs has been that exports are now seeing a gradual recovery in key markets, including Africa,” said brokerage firm Motilal Oswal Financial Services.

Motilal Oswal projects auto companies under its coverage to report year-on-year (YoY) growth of 9% in Revenue, 9% in EBITDA, and 6% in PAT for Q3FY25. The raw material cost for auto OEMs is expected to remain stable on a quarter-on-quarter (QoQ) basis. Consequently, the margins for these companies are anticipated to remain largely steady both YoY and QoQ.

Earnings Estimate Cuts

The second quarter of FY25 saw significant earnings downgrades for most auto companies under MOFSL’s coverage, primarily due to weak demand and unfavorable macroeconomic conditions. In Q3FY25, the brokerage has further revised its estimates downward for 7 out of 26 companies, with no notable upgrades, reflecting its cautious stance on the likelihood of a substantial demand recovery across segments.

Key downgrades include Bajaj Auto (13%), Tata Motors (6%), Ashok Leyland (7%), Samvardhana Motherson International (5%), Sona BLW Precision Forgings (16%), Motherson Sumi Wiring India (7%), and Happy Forgings (6%).

“A muted demand outlook across segments in the domestic auto industry and uncertainty in export demand make us maintain our cautious stance on the sector,” MOFSL said.

Auto Sector Top Picks

Except for the tractor segment, which is seeing a healthy demand uptick, MOFSL said it is not seeing any signs of healthy growth in any other key auto segments, at least in the near term.

Maruti Suzuki India is its top pick among auto OEMs as its upcoming new launches are expected to continue to help improve the mix and drive healthy earnings growth. It also likes Hyundai Motor India as it appears well-aligned to benefit from the industry trends toward UVs. Among ancillaries, it prefers Samvardhana Motherson International, Endurance Technologies and Happy Forgings.

Here are the Q3 results estimates of top auto companies:

Maruti Suzuki Q3 Results

Maruti Suzuki India, the largest passenger car maker in India, is expected to post revenue growth of 16% YoY in Q3FY25, led by strong volumes and higher realisation. The company’s net profit is estimated to rise 12% YoY to ₹3,508 crore. EBITDA growth is seen at 9%, while EBITDA margin may contract, mainly on higher discounts, according to estimates by Nuvama Institutional Equities.

Tata Motors Q3 Results

Tata Motors consolidated revenue in Q3FY25 is seen rising 6% YoY supported by growth in Jaguar Land Rover (JLR) and India PV divisions. Net profit for the quarter is estimated to rise 9% YoY. At the operational level, consolidated EBITDA may grow 12%, while EBITDA margin to expand on better margins in India CV and PV divisions. Key things to watch out for is JLR demand and margin outlook.

Mahindra & Mahindra Q3 Results

While M&M’s auto volumes were up 17% YoY, tractors posted a smart recovery with a 20% YoY growth in Q3. While tractor segment margins should improve 100 bp QoQ to 18.5%, auto segment margin is expected to decline 50 bps QoQ to 9% due to high discounts and increased promotional spends in Q3FY25, as per MOFSL.

Hero MotoCorp Q3 Results

The world’s largest two-wheeler manufacturer, Hero MotoCorp is estimated to see revenue growth of 4% YoY in Q3FY25 supported by increase in realisation. Net profit may rise 5% YoY, while EBITDA growth is expected to by 4%, with the EBITDA margin likely to be flat.

Bajaj Auto Q3 Results

Volume growth and better realisation shall support 4% YoY revenue growth for Bajaj Auto during the third quarter ended December 2024. EBITDA margin is expected to contract marginally YoY due to higher discounts/ marketing spends. Net profit is estimated to grow 4% YoY, as per Nuvama estimates.

TVS Motor Company Q3 Results

TVS Motor Company may see 11% revenue growth led by higher volumes, while net profit is expected to rise 10% YoY. EBITDA may grow 14% YoY, while EBITDA margin is expected to expand marginally on better net pricing.

Disclaimer: 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.