Automobile - Q2FY13 Results Preview - 2Q - A weak quarter ahead! - Centrum

We expect a weak quarter for our auto coverage universe* for 2QFY13. We expect the companies in our coverage universe to register revenue growth of 14.5% YoY (drop of 3% QoQ) as volumes for the coverage universe were under pressure during the quarter (down 8.6% YoY and 10.4% QoQ). This is likely to have a negative impact on operating leverage and hence, we expect EBITDA margins for our coverage universe to register a drop of 70bps YoY and 77bps QoQ. Given the weak operating performance, we expect adjusted PAT to remain flat YoY and register a drop of 6% QoQ.

Key Highlights:

Revenue growth to remain subdued: We expect our auto universe to register a revenue growth of 14.5% on a YoY basis, driven largely by realization growth as volumes registered a drop of 9% YoY. However, on a sequential basis, we expect revenue to register a drop of 3%.

...Margins to remain under pressure: We expect pressure on EBITDA margins to continue and contract by 70bps YoY and 77bps QoQ.

Earnings a mixed bag: We expect adjusted PAT to remain flat YoY and register a drop of 6% QoQ. Among large-cap auto stocks, Tata Motors is likely to be the best performer followed by M&M and Eicher Motors.

Valuations and recommendations: We continue to remain positive on Bajaj Auto in the 2W space and on Tata Motors and Maruti in the 4W space. We maintain Neutral rating on M&M, Eicher Motors and Ashok Leyland.

(* Maruti Suzuki, Mahindra & Mahindra, Hero MotoCorp, Bajaj Auto, Ashok Leyland,Eicher Motors and Tata Motors)

Source : Equity Bulls

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