Autos - India: Riding through macro noise: Demand holds, costs bite. Stay selective

Research evidence excerpt

Autos - India: Riding through macro noise: Demand holds, costs bite. Stay selective

ter

alive especially for entry segment and CVs. History suggests fuel inflation is a risk, but

Autos - India: Navigating Conflict,rarely the primary driver of the auto cycle; broader variables such as household income,

Crude & Q4: Selective: 2W Defensive,financing availability, replacement demand and regulation matter far more. Among

CV high beta, PV brakesegments, 2Ws & PVs appear less affected by fuel price action unless broader economic

activity softens. That said, vehicle price inflation can weigh on sentiment and 2Ws have

Exhibit 1: Rating and PO summary of ourled with aggressive price hike action. PV OEMs have been more reluctant to pass

coverage

through costs prioritizing demand and growth in the near term. For trucks, sharp diesel India Autos: Rating and PO summary

inflation is overhang, but replacement cycle and freight activity are the key.

Rating PO (Rs)

Mahindra & Mahindra Buy 3900Margin squeeze: near term pain, mean reversion in F28?

Earnings cycle has reversed since March amid the Iran-led commodity shock, eroding Bajaj Auto Buy 12000

Eicher Motors Buy 7850

large part of post GST earnings upgrades for Auto OEMs. This drag is largely due to Tata Motors CV Buy 470

metal price inflation and consequent margin hit, which will be most visible in Q1-Q2 of Ashok Leyland Buy 187

F27. The companies that stood out on margin delivery, with negligible cuts, were M&M, Hero Motocorp Buy 6150

Bajaj Auto and Eicher. Q4 commentary from rest sounded more cautious on near term Sona Comstar Buy 670

margins, with GM headwind ranging from 3-5% of Net sales, which can only be partly Bharat Forge Buy 2200

Maruti Neutral 14000

covered with price hikes.