Q1 results preview: Auto ancillary cos to outperform OEMs on rising content per vehicle says Emkay; lists top picks

Q1 results preview: Auto Ancillaries are expected to continue outperforming original equipment manufacturers (OEMs) on increased content per vehicle, according to brokerage firm Emkay Global Financial Services' Q1FY25 preview report on the auto ancillaries industry. Bharat Forge, Suprajit Engineering, and Pricol are anticipated by the brokerage to be among the best performers in Q1.

“We expect our coverage ancillary pack to post healthy double-digit revenue growth (~15% YoY),” added the brokerage. According to the brokerage, it would be propelled by the sustained outperformance trend against the underlying sector and clients as a result of OEM production levels increasing, premiumisation, and content increase per vehicle.

Due to larger scale, margins are expected to increase by approximately 55 basis points (bps) year over year (YoY). However, sequentially, they anticipate a decline of about 80 bps because of stable revenue and rising commodity prices (such as those of rubber, aluminum, and copper), which will be passed on with the customary lag. In light of increased demand, tyre growth is predicted to be in the mid-single digits (compared to a low single digit in Q4).

Here are Q1 result previews of top Auto Ancillary companies:

Bharat Forge

The brokerage claims that more content, further ramp-up in the defense sector, and underlying industry development will all support revenue success. Increased scale QoQ will accelerate sequential growth in margin.

Uno Minda

Revenues will increase YoY with enhanced outperformance compared to important clients, consistent with the current pattern and robust underlying industry production growth; the brokerage noted that margins would drop due to greater costs for the recently established facilities.

Suprajit Engineering

Due to the bottoming out of the worldwide market and improvements in domestic 2W production, the brokerage anticipates double-digit revenue growth year over year. On a quarterly basis, the brokerage sees margins being relatively constant.

Pricol

In light of the robust double-digit rise in 2W industry output, the brokerage anticipates solid revenue performance on a year-over-year basis and essentially constant margins on a sequential basis.

Shriram Pistons

According to the brokerage, revenues will increase by a mid-single digit YoY amidst strong underlying production growth in the auto sector; margins will decrease on a QoQ basis mostly as a result of reduced scale.

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