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Auto OEMs fared well on margin front


Auto OEMs fared well on margin front
It was a heavy result week in the Auto OEM space. Notably, all OEM’s fared well on the margin front with reported PAT coming in more or less around the consensus estimates. Importantly, none of the OEM’s committed on future growth prospects and sounded cautiously optimistic on the near-term demand. On high base OEM volumes are expected to be single digit in Q4FY25E. Premiumisation and Electrification continue to be the underlying themes in auto space with record EV launches/reveal in the recently concluded Bharat Mobility Global Expo.
Bajaj Auto: Reported steady performance in Q3FY25, maintains 20% EBITDA margin profileBajaj Auto ramp up in the EV domain has been quiet exciting with its Chetak brand amongst the top E-2W domestically. It has also successfully navigated the premiumisation drive in the domestic motorcycle segment. We upgrade our rating on the stock to BUY and value Bajaj Auto at ₹ 10,475 on SoTP basis (26x P/E on FY27E core earnings + value of investments).
Tata Motors: Quarterly results below expectations, muted growth outlook across segmentsThe management indicated high competitive intensity in market place as well as subdued demand environment especially in one of its key markets such as China.
- We downgrade the stock to HOLD and value it ₹ 780 on SoTP basis (10x/2x EV/EBITDA to India/JLR business on FY26E)
Maruti Suzuki: Volume drives topline growth while higher A&P spends dent margins in Q3FY25 With Exports gaining traction and under penetration in domestic PV space, MSIL is poised to benefit. With capacity expansion underway, we expect Sales and PAT at MSIL to grow at a CAGR 10% & 11% respectively over FY24- 27E. However, with growth tapering in near to medium term, we maintain our HOLD rating on MSIL and value it at ₹ 13,320 i.e. 23x P/E on FY27E
Our Top bet in Auto OEM space is M&M wherein we have a BUY rating on the stock with a target price of ₹ 3,600
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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