Auto Sector Q4 Preview: Four-wheelers to drive momentum, says Emkay; TVS Motor, M&M, MSIL among top picks

According to Emkay Global Financial Services, the Indian auto sector is expected to witness moderate growth in the fourth quarter of FY25, with four-wheelers leading the charge. The firm highlighted that while the momentum has slowed from double-digit growth to high single or low double digits, select companies such as Eicher Motors (EIM), TVS Motor, Mahindra & Mahindra (M&M), and Maruti Suzuki (MSIL) are likely to emerge as Q4 outperformers. The brokerage has also revised its ratings and estimates across the sector, factoring in demand normalization and global uncertainties.

2W Segment: EIM and TVSL to Outperform

Emkay said the two-wheeler segment is expected to post approximately 6 percent revenue growth in Q4FY25, supported by 20 percent and 11 percent growth at Eicher Motors and TVS Motor respectively. While EIM and TVSL benefitted from strong volume growth—24 percent and 15 percent YoY respectively—others like Bajaj Auto and Hero MotoCorp witnessed muted performance. Emkay added that EIM's share of premium bikes such as the Bullet series likely increased, with margin expansion of about 40 basis points due to higher volumes. TVSL’s gains were driven by a favorable mix in domestic and export markets.

4W Segment: M&M and Ashok Leyland in Focus

In the four-wheeler category, Emkay estimated 11 percent revenue growth YoY, driven by strong sales across most OEMs. It noted that Mahindra & Mahindra and Ashok Leyland are likely top performers, with M&M receiving a rating upgrade to ‘ADD’. Passenger vehicle volumes grew by 18 percent at M&M and 3 percent at Maruti Suzuki. On the margin front, M&M was seen benefiting from the launch of EVs, while Tata Motors experienced mixed trends due to the performance of JLR and its domestic CV business. Emkay expects operating leverage to support margin improvement for Hyundai, Ashok Leyland, and Tata Motors sequentially.

Ancillaries: Uno Minda Shines Amid Mixed Trends

Auto ancillaries are likely to report 7 percent revenue growth YoY, slightly lower than OEMs, Emkay said. The segment saw pressure due to softness in tyre demand and slower growth at Bharat Forge (BHFC). Emkay downgraded BHFC to ‘ADD’ and cut its target price by 8 percent to ₹1,200, citing weaker trends in domestic and export markets. In contrast, Uno Minda was upgraded to ‘ADD’ and is expected to outperform in Q4, supported by growth in content per vehicle and continued premiumization trends.

Global Challenges Prompt FY26-27 Earnings Cuts

Emkay also revised down earnings estimates for FY26 and FY27 by about 4 percent for its coverage universe. The brokerage cited slowing domestic demand and global risks, including rising tariff wars and economic slowdown in key export markets like the US. Stocks with international exposure, such as BHFC, SAMIL, and Suprajit, saw sharper cuts in earnings estimates of 9 to 12 percent. Despite this, the recent correction in stock prices has made valuations attractive for select companies, leading to rating upgrades for M&M and Uno Minda.

Stock Picks

Emkay reiterated its preference for the two-wheeler space, citing visible replacement demand, potential rural revival, and more clarity in the electric vehicle segment. Among passenger vehicle makers, Maruti Suzuki stands out with strong upcoming ICE SUV launches, while Tata Motors continues to offer value at current JLR valuations. In the ancillary space, Shriram Pistons and Pricol are among the favored names. Emkay’s top picks in the sector remain Eicher Motors, TVS Motor, and Maruti Suzuki.