Auto Stocks Outlook for the week – 31.07.2017 to 04.008.2017

Auto Stocks Outlook for the week – 31.07.2017 to 04.008.2017

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Auto Stocks Outlook for the week – 31.07.2017 to 04.008.2017 )

Stocks of most automobile companies are seen rising next week on the back of strong positive outlook for heavyweight stocks such as Eicher Motors Ltd and Maruti Suzuki India Ltd. Maruti Suzuki reported just 4.4% on year growth in its net profit at 15.6 bln rupees on Thursday due to a sharp decline in margins. High input costs, marketing expenses, and compensation to dealers for tax loss on account of transition to the goods and services tax regime weighed on the company's operating margins. However, most analysts continue to have a positive outlook on the company.
Strong volume growth on the back of Ciaz sedan, Vitara Brezza, and Baleno, an increase in average selling price due to a rise in demand for premium models, and fresh capacity addition at the Gujarat facility are all seen as positives. The two companies are seen as major beneficiaries of demand revival over the next two years. M&M will report its earnings on Friday. The automaker is expected to report a bottomline of 8.8 bln rupees on a topline of 113.3 bln rupees. Tractor growth was partially offset by weakness in the utility vehicle space leading to revenue forecast remaining flat. Standalone EBITDA (earnings before interest, tax, depreciation, and amortisation) margin at 10.5% is expected to rise 200 basis points sequentially led by better product mix and lower expenses. Hero MotoCorp Ltd reported its earnings on Tuesday with net profit rising 3.5% on year to 9.14 bln rupees largely
led by a rise in sales. With nearly 50% of the company's sales coming from the rural markets, the two-wheeler maker is also expected to be a beneficiary of the likely revival in the rural economy. We expect the company to post strong volume growth in Jul-Sep, owing to festive season demand and lower channel inventory. Premium motorcycle maker Eicher Motors Ltd, with the best operating margin in the industry at 31%, due to new launches and sustained demand.

Source : Cogencis Information Services Ltd.