India Auto Sector Q3 Earnings Preview - Some Improvement; Global Exposure To Be Worse Off: Systematix
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Systematix Research Report
As highlighted in our latest note, the demand momentum for passenger vehicles remains healthy. Inventory is at multi-year low levels. Two-wheeler demand remains subdued with a weak offtake, especially in urban pockets.
It is a seasonally strong quarter for commercial vehicles; however, a recent spike in Covid-19 cases could hurt retail demand.
Latest media reports indicate a marginal increase in commodity costs in Q3 FY22. However, commodity-led headwinds should recede with commodity prices stabilising at current levels.
For ancillaries, any impact of the lag in commodity price pass-through could hurt operating margins (utilisation levels at ~70% for Q3).
We expect component players with global exposure to see the impact of supply chain constraints and Covid-19 on utilisation levels.
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