Nifty Auto index hits 3-year low; down 12% in a month

Shares of automobile and auto-related companies were under pressure with Nifty Auto index hitting 3-year low on Tuesday on subdued volume growth and disappointing set of financial numbers for the quarter ended March 2019 (Q4FY19).

At 10:27 am, Nifty Auto index was down 1 per cent at 7,860 after hitting an intra-day low of 7,858, its lowest level since April 11, 2016 on the National Stock Exchange (NSE). In the past one month, auto index has plunged 12 per cent, as compared to 4.4 per cent fall in the benchmark Nifty 50 index.

Motherson Sumi Systems, Apollo Tyres, Eicher Motors, Ashok Leyland and Tata Motors from the Nifty Auto index slipped more than 13 per cent in the past month. Maruti Suzuki India, Mahindra & Mahindra, MRF, Amara Raja Batteries, TVS Motor Company and Bharat Forge have seen their market price decline in the range of 8 to 11 per cent.

A total of seven companies from the auto index have thus far announced their Q4FY19 results. Together, they posted a 10 per cent year on year (YoY) decline in PBIDT (profit before interest, depreciation and tax) while Operational income of these companies remained subdued, up 1 per cent at Rs 45,102 crore on YoY basis.

Eicher Motors today hit a fresh 52-week low of Rs 18,205, down 11 per cent in the past two trading days after the company reported weak operational performance in Q4FY19. The EBITDA (earnings before interest, tax, depreciation and amortization) margin contracted to 27.4 per cent, down 164 basis points on sequential basis and 415 bps on yearly basis.

The company, which manufacters the iconic Royal Enfield motorcycles, reported the lowest EBITDA margins in the last 14 quarters on the back of higher technological cost due to upgraded anti-lock braking system (ABS), higher promotional activities, store expansion and weaker operating leverage.

With upcoming BS6 cost increases in FY21, analysts at Elara Capital believe margin will come under further pressure. Given price increases, the brokerage firm expects growth rates in low per capita income states to moderate (market share already at 3-5 per cent there vs some high per capita income states stagnating at 5-8 per cent; restricting pace of increase).

The automobile industry continued to remain in a slow lane in April 2019 as well. The automobile industry has been facing challenges since the past 6-7 months in terms of additional burden of new insurance policy and constraints on loan disbursement from financial institutions amid new RBI policy. Moreover, higher axle load norm continue taking toll on commercial vehicle sales for the past six months, which got reflected in weaker wholesale numbers during the month.

COMPANY	LATEST	ONE-MONTH BEFORE	LOSS(%)
MOTHERSON SUMI	120.80	149.15	-19.01
APOLLO TYRES	180.00	215.00	-16.28
TATA MOTORS	183.35	215.95	-15.10
EICHER MOTORS	18398.85	21361.15	-13.87
ASHOK LEYLAND	83.00	95.65	-13.23
MARUTI SUZUKI	6530.00	7342.85	-11.07
M & M	613.00	678.20	-9.61
MRF	52978.95	58515.75	-9.46
AMARA RAJA BATT.	631.05	692.60	-8.89
BHARAT FORGE	451.65	492.50	-8.29
TVS MOTOR CO.	460.15	500.00	-7.97
BOSCH	16716.20	17980.55	-7.03
EXIDE INDS.	206.10	220.90	-6.70
HERO MOTOCORP	2483.00	2639.90	-5.94
BAJAJ AUTO	2906.80	3008.15	-3.37