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A few sectors are expected to report double-digit earnings growth in the March quarter. The automobile sector is one. While two-wheelers have seen volumes come under pressure, passenger cars and commercial vehicles fared better. While the sector is expected to headline revenues in low single digits, net profit growth could be in the region of 10 per cent. Most automakers might report margin expansion, as raw material costs have declined and currency movement has been beneficial for the sector. The yen depreciated by four per cent during the quarter against the rupee, which will have a positive impact on players such as Maruti and Hero MotoCorp.
As the volume growth for two-wheelers decelerated during the quarter, analysts don’t expect overall revenue growth to be strong in the March quarter. Bajaj Auto's volumes are estimated to have declined 14 per cent, while Hero MotoCorp's volumes fell one per cent. Eicher, Maruti and Ashok Leyland have reported robust volume growth, which would reflect in the revenue growth of these companies, too. Excluding Tata Motors, Kotak Institutional Equities expects the auto sector's revenues to grow four per cent in the March quarter, while net profit growth could be 10 per cent.
Maruti is expected to be report revenue growth of 11 per cent on the back of a seven per cent rise in volumes during the quarter. Reliance Securities expects the operating margin to improve 48 basis points (bps) sequentially, on the back of favourable currency movement, better product mix and higher localisation.
Among two-wheelers, Hero is expected to report revenue growth of 1.2 per cent, year-on-year. Operating margins could improve by 100 bps on lower promotional activity, favourable currency and cost-cutting. Bajaj, on the other hand, is expected to see revenues decline eight per cent and operating margins contract by 110 bps. Bajaj Auto's post-tax profit is expected to decline by 11 per cent year-on-year. Among two-wheelers, TVS is likely to post 12 per cent revenue growth in Q4 on the back of seven per cent volume growth.
Mahindra & Mahindra (M&M) is expected to report a rather weak quarter, thanks to a 15 per cent volume decline. Spark Capital expects M&M's revenues to decline 15 per cent, thanks to an eight per cent decline in auto volumes and 31 per cent decline in tractors. Operating margins are expected to contract 150 bps sequentially, due to lower capacity utilisation.
