Will four-wheeler stocks hit the fast lane in H2 of this fiscal?

The automobile industry, especially, four-wheelers, is expected to pick up momentum in the coming months as robust demand and easing supply worries lift their prospects.

As per analysts, pent-up demand, new launches and increased mobility are among the key factors driving growth.

Patil estimates a 15% year-on-year growth for passenger vehicles in the current fiscal, which could cool down to 12-13% in FY24 on a high base.

Besides, analysts also expect a decent improvement in consolidated profit margins for passenger vehicle makers in FY23 due to the declining prices of key raw materials such as aluminum and steel.

Those at JM Financial, for instance, say, “Owing to a 10% correction in steel prices recently, we expect gross margin to be favorably impacted in Q3FY23. Our analysis suggests that a 5% correction in the raw material basket will benefit the EPS by 2-15% for auto and auto ancillary companies.”

Saji John, Auto Research Analyst, Geojit Financial Services says festive season, normal monsoon, EV adoption to drive volumes.

Production levels have normalised amid fall in metal, fuel prices. Remain watchful on inflation, borrowing costs in near-term.

On the bourses, shares of four-wheeler companies like Maruti, Ashok Leyland and Mahindra & Mahindra have surged up to 50% so far this year as sales improved amid easing semi-conductor shortages and demand pick-up.

In comparison, the index has gained 18%, while the Nifty50 edged just 1% higher during the period.

That said, market mood will be steered by global peers today as investors react to PMI data from across the western countries. In the primary market, Dreamfolks Services’ IPO will open for subscription.

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