Nuvama Institutional Equities remains positive on the auto sector, with Hyundai Motor India, Tata Motors Passenger Vehicles, Eicher Motors, Samvardhana Motherson International, Minda Corporation, Motherson Wiring India and ASK Automotive among its top picks. The brokerage expects healthy demand, a strong launch pipeline, the Pay Commission impact and reasonable valuations to support the sector, although cost inflation is likely to weigh on margins in Q2 FY27.
Nuvama’s coverage remains strongly positive across the auto sector, with Buy ratings dominating across two-wheelers, OEMs and auto-ancillary companies. Among two-wheelers, Eicher Motors, TVS Motor, Bajaj Auto and Hero MotoCorp are all rated Buy.
In the OEM segment, Nuvama has a Buy rating on Maruti Suzuki, Hyundai Motor India, Mahindra & Mahindra, Tata Motors CV, Tata Motors PV, Ashok Leyland and Ajax Engineering, while Escorts Kubota is rated Hold.
Among auto components, the brokerage remains positive on Samvardhana Motherson, Motherson Wiring, Uno Minda, Minda Corporation, Schaeffler and Timken, among others. Bharat Forge and Sona BLW are rated Hold, while CEAT also carries a Hold rating.
For the September quarter, Nuvama expects aggregate revenue across its coverage, excluding Tata Motors Passenger Vehicles, to grow 27% year-on-year, driven by robust industry volumes and improved pricing. However, EBITDA growth is expected to trail at 10%, as higher commodity prices, wage inflation and freight costs put pressure on profitability.
Among OEMs, the brokerage expects strong EBITDA growth from Tata Motors Passenger Vehicles, Tata Motors Commercial Vehicles, TVS Motor and Bajaj Auto, while Exide Industries, Minda Corporation, ASK Automotive and Samvardhana Motherson International are expected to outperform among auto ancillaries.
PV segment
Domestic passenger vehicle volumes surged around 30% YoY during the quarter, while exports declined marginally. Nuvama expects revenue growth to be driven by higher volumes, price hikes, richer product mix and increasing electrification.
Tata Motors Passenger Vehicles is expected to lead with 47% revenue growth in India, followed by M&M Auto at 34%, Maruti Suzuki at 27% and Hyundai Motor India at 19%.
Commercial vehicles
Domestic CV volumes rose around 28% YoY, helped by a favourable base and replacement demand. Nuvama expects the strong volume momentum, along with price hikes, to drive robust revenue growth.
It estimates revenue growth of 49% for TMCV and 37% for Ashok Leyland.
Two-wheelers
Domestic two-wheeler volumes increased around 15%, while exports jumped about 27%. Besides volume growth, better realisations and favourable currency movements are expected to support revenue.
Nuvama expects TVS Motor to lead OEM revenue growth at 38%, followed by Bajaj Auto at 31%, Eicher Motors at 23% and Hero MotoCorp at 21%.
Tractors
Domestic tractor volumes are expected to decline around 5% YoY due to a high base, partly reflecting an early festive season and subsidy benefits. Nuvama expects Escorts Kubota’s revenue to rise 14%, while Mahindra & Mahindra’s farm-equipment business could see a 4% decline.
Tata Motors Passenger Vehicles
Nuvama expects Tata Motors Passenger Vehicles’ India PV revenue to surge 47%, while Jaguar Land Rover’s revenue in GBP is estimated to increase 27% on a low base.
India PV margins are expected to contract due to commodity inflation, while JLR is likely to see a notable margin improvement on a low base. JLR’s year-ago quarter was impacted by a cyberattack that disrupted production and reduced volumes.
Auto ancillaries
The brokerage expects healthy double-digit revenue growth across its auto-ancillary coverage. Motherson Wiring India, ASK Automotive, Minda Corporation and Bharat Forge are expected to outperform, with estimated revenue growth of 40%, 38%, 34% and 31%, respectively.
EBITDA growth to trail revenue
Despite the expected 27% revenue growth, Nuvama forecasts aggregate EBITDA growth of only 10% YoY, reflecting continued cost pressures from higher commodity prices, wage inflation and freight rates.
The depreciating rupee is expected to provide some relief to companies with significant export exposure. Nuvama expects strong EBITDA growth from TMPV, TMCV, TVS Motor, Bajaj Auto, Exide Industries and Minda Corporation, while Hyundai Motor India, Apollo Tyres and CEAT are likely to see double-digit EBITDA declines.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
