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Auto: GST rate cut tailwind to lift performance; operating leverage to outpower marginal RM pressure

ICICIdirect Research 17 Apr 2026 DISCLAIMER

For the Automotive industry, Q4FY26 is expected to be strong with ~20%+ YoY revenue growth driven by volume growth of ~20%+, with operating leverage supporting margins.

Segment wise, volume outperformance for the quarter is led by 2-W space with ~25% volume growth, followed by CV domain at ~20% and PV’s at ~12% on YoY basis.

On margins front, for the OEM’s, we expect it to be largely flattish on the QoQ basis amidst operating leverage benefits and INR depreciation tailwinds (robust growth in exports) to offset marginal pressure on gross margins & higher logistics costs. CV space however could report strong QoQ earnings given seasonally strong Q4 coupled with robust volume growth.

On ancillaries’ front, tyre companies could report muted performance amidst rise in RM costs; domestic natural rubber prices up 12% QoQ at ₹ 207/kg in Q4FY26 vs. ₹ 185/kg in Q3FY26

Key monitorable going forward would be companies’ commentary on gross margins amidst recent up move in crude derivative prices (plastic, synthetic rubber, etc.) as well as rise in metal prices (both steel as well as aluminium) amidst ongoing geo-political conflict.

While Q4 remains strong, cost pressures are expected to reflect more clearly in Q1FY27, making demand resilience a key factor ahead.

Stocks Preferred – Mahindra & Mahindra, Lumax Auto Tech, Sansera Eng

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