Auto and auto ancillary - Q1FY21 Result Preview - ICICI Securities

Q1FY21 was an unprecedented quarter for the auto space, in line with the rest of the economy. With the first six to seven weeks of the period, a complete write off on account of measures put in place to contain Covid-19 spread, production and sales activity was restricted to the latter half - and that too in a limited manner. Amid effective 'normal' operations for ~40% of the quarter, earnings expectations for the space were severely curtailed on all fronts and practically incomparable to any other period.

Negative operating leverage to weigh heavily on profitability...

Our coverage universe is expected to suffer a steep decline in topline (down 62% YoY to Rs. 51,324 crore), margins (down 670 bps QoQ to 1.8%) and profitability (expected loss of Rs. 6,072 crore vs. profit of Rs. 3,816 crore in the base quarter). Margin performance is expected to be mixed amid divergent input material trend and varying impact of product mix, BS-VI pricing environment. Ex-Tata Motors, our coverage universe is expected to post 72% YoY topline fall with EBITDA margins of 1.3%, loss at PAT level of Rs. 557 crore. Due to higher aftermarket share, solid gross margin expansion (particularly in case of battery and tyre makers), ancillary pack is seen outperforming OEMs at net sales, EBITDA level. Among OEMs' (ex-Tata Motors), topline decline is expected at 74% YoY with margins at 1.1%. For ancillaries, topline de-growth is expected at 62% YoY with margins at 2.2%.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_AutoAncillary_Q1FY21.pdf

Source : Equity Bulls

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