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The performance of auto component major Bosch for the fourth quarter of 2024-25 (Q4FY25) was better than Street estimates. The outperformance was largely led by strong revenue growth, with most business segments contributing to its overall growth.
While there are medium- to long-term triggers, especially on the margin front, the Street is cautious on the near-term outlook. This is due to a muted outlook for most segments. The 21 per cent gain of the stock over the past three months also caps the upside potential.
The company posted a revenue growth of 16 per cent, and this was largely led by the 14.9 per cent growth in the mobility business. Within the mobility segment, power solutions saw a growth of 16.9 per cent year-on-year (Y-o-Y) riding on higher demand for diesel components, particularly off-highway as well as electric and vehicle control parts.
The two-wheeler segment grew by 21.4 per cent over the year-ago quarter due to higher sales of exhaust gas sensors led by transition to BS VI onboard diagnostic 2 (OBD 2) norms implementation from April 2025.
The aftermarket business saw a growth of 7.9 per cent Y-o-Y due to demand for diesel systems from original equipment manufacturers (OEMs), filters, and spark plugs. Consumer goods business saw 3 per cent Y-o-Y growth on the back of demand for power tools, including grinders, drillers, and cutters.
The FY25 revenue growth of 8 per cent, however, missed the guidance of double-digit growth.
Higher revenue growth and lower input costs helped the company post a 300 basis points (bps) improvement in gross margins Y-o-Y. Raw material cost as a percentage of sales was down 310 bps as compared to the year-ago quarter. The gains on the gross margin front, however, did not percolate down to the operating level, given higher other expenses. The operating profit margins for the quarter were flattish Y-o-Y as other expenses as a proportion of sales were up 300 bps.
The demand outlook for major auto segments would be a key trigger for the stock. The auto sector reported muted wholesale volumes across passenger and commercial vehicles in May due to weak retail (down 4-6 per cent Y-o-Y) demand. The domestic two-wheeler and tractor segments saw a single-digit Y-o-Y growth due to the wedding season, and positive farm sentiment.
The demand momentum for tractors, according to Rishi Vora of Kotak Institutional Equities, is expected to remain strong, driven by early advancement of above-normal monsoon for kharif sowing, better reservoir levels, sustained government support, and favourable terms of trade for the farmer. Growth for most other segments could be sluggish.
This could weigh on Bosch’s prospects going ahead. Aniket Mhatre of Motilal Oswal Research says, “The auto demand outlook continues to be subdued across key segments in the near term. Further, while Bosch is working towards localisation of new technologies, given the long gestation projects, its margin is likely to remain under pressure, with no visibility of any material improvement, at least in the near term.” The brokerage has a “Neutral” rating on it as at 39 times its FY26 earnings, the stock is fully valued.
While ICICI Securities is also cautious on the near-term outlook, it believes that there are triggers related to higher content per vehicle, and localisation efforts by the company. Analysts led by Vishakha Maliwal of the brokerage believe that in the medium-to-long term, technological and regulatory changes, including TREM V (tractor and other non-road mobile machinery) norms, are expected to increase the content per vehicle. Current timeline for TREM V introduction is April 2026, by when the company would have a good level of localisation, which would add to margin and content per vehicle, they say. The brokerage has upgraded the stock to “Hold” from “Reduce”.
