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Automobiles Sector Check - Earnings Recovery Across The Space: ICICI Securities

Automobiles Sector Check - Earnings Recovery Across The Space: ICICI Securities



Cars and buses work their way through traffic in New Delhi. (Prashanth Vishwanathan/Bloomberg)
Cars and buses work their way through traffic in New Delhi. (Prashanth Vishwanathan/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.

ICICI Securities Report

Post getting impacted by 18-20% total cost of ownership inflation across sub-segments in the sector along with demand disruption on account of Covid-19 led lockdowns, demand across majority of the sector has gone back to levels seen ~10 years ago.

Elevated raw material costs further added to the weak operating leverage of the players. We believe, in FY23E-FY24E, with no major driver of total cost of ownership and stabilising raw material basket cost, auto original equipment manufacturer space is set for both demand and margin revival.

Within the space, we are more positive on commercial vehicles on account of sharp cyclical revival expectation. Electric two-wheeler mix is expected to reach ~10% of two-wheelers by FY24E, post which the real upsurge is likely to happen as local battery pack manufacturing kick starts.

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ICICI Securities Automobiles Sector Update.pdf

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