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HDFC Securities: Autos And Transportation Earnings Preview - Q2 Sees Festive Uptick

The auto and transport sectors are likely to post an all-round improvement in margins in Q2 FY21 due to rising utilisation levels.

Light trails created by vehicle traffic, including cars, trucks and vans travel on the 405 freeway at night (Photographer: Patrick T. Fallon/Bloomberg)  
Light trails created by vehicle traffic, including cars, trucks and vans travel on the 405 freeway at night (Photographer: Patrick T. Fallon/Bloomberg)  

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HDFC Securities Report

Demand is now back up to pre-Covid-19 levels across sectors, including two-wheelers, passenger cars and tractor segments.

The sales recovery is led by the further opening of various regions (unlock-five), sustained rural demand and inventory build-up ahead of the festive season.

We expect an all-round improvement in margins in Q2 FY21 driven by rising utilisation levels (production is now running at 65-90% of capacity).

Correspondingly, valuation multiple for auto companies continue to re-rate and are now trading at levels between mean price/earning and +1 standard deviation.

Nifty Auto index is up a further 20% over the quarter (versus 9% for the broader Nifty).

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HDFC Securities Autos, Transportation - Q2FY21 Results Preview.pdf

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