ADVERTISEMENT

Auto, Auto Ancillary Preview - Weak Q3 Due To Demand, Raw Material Headwinds; Focus On Commentary: Nirmal Bang

Auto, Auto Ancillary Preview - Weak Q3 Due To Demand, Raw Material Headwinds; Focus On Commentary: Nirmal Bang

<div class="paragraphs"><p>An employee wearing a protective face mask lifts a component from a rack on a production line&nbsp; (Photographer: Qilai Shen/Bloomberg)</p></div>
An employee wearing a protective face mask lifts a component from a rack on a production line  (Photographer: Qilai Shen/Bloomberg)

BQ Blue’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BloombergQuint’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

Nirmal Bang Report

We expect Q3 FY22 earnings of auto and auto ancillary companies in our coverage universe to be relatively subdued due to sustained input cost headwinds and muted demand (weak festivals, supply chain constraints and moderating rural growth).

We anticipate gross margin contraction of 10-40 basis points on a QoQ basis due to continued raw material cost pressures. However, with major commodities showing signs of stabilising/moderating prices at current levels, we note that further impact on gross margins could be limited.

Ebitda margins should witness softer trends on YoY basis, but will be partially supported on a QoQ basis by positive operating leverage, price hikes and tight cost controls across most companies.

We surmise that current issues of supply chain constraints and rising Covid-19 cases are dynamic, but we see them leading to subdued demand and weak profitability in Q4 FY22 too.

Click on the attachment to read the full report:

Nirmal Bang Automobile-Automobile Ancillary Sectors -Q3FY22 Result Preview-6 January 2022.pdf

DISCLAIMER

This report is authored by an external party. BloombergQuint does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BloombergQuint.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.