COVID-19, inventory correction before BSVI transition to hit auto revenues in March qtr
Besides, the higher discounts and operating de-leverage are expected to contract aggregate margins by 240 basis point year-on-yea, Emkay Global Financial Services, said in its report on the auto and auto ancillaries.
Most of the manufacturing activities, including in the auto sector, are suspended since March 25 when the government implemented a 21-day lockdown to contain the spread of coronavirus.
States like Maharashtra, Punjab, Odisha, Telangana and West Bengal have already announced the extension of lockdown till April 30.
"Aggregate revenue (in March quarter) is likely to decline 26 per cent year-on-year, owing to the Covid-19 outbreak and inventory correction before BS6 transition. Firms that are likely to record a steep fall in revenue are deep cyclicals or companies with global linkages," Emkay Global said.
The March quarter topline of the companies covered under the report are likely to be weak with 28 per cent year-on-year fall , it said adding the decline will be sharp for deep cyclicals and companies with global linkages.
The auto makers included in its analysis are Tata Motors, M&M Ltd, Maruti Suzuki India, Hero MotoCorp, TVS Motors, Ashok Leyland, Bajaj Auto, Eicher Motors, Escorts and Atul Auto.
Apollo Tyres, Amara raja, Exide, Motherson Sumi and Bharat Forge were among the ancillary makers.
The report said it expects the rebound in sales to be sooner in passenger vehicles, premium motorcycles and tractors segment.
"Although near-term weakness is expected to continue as the Covid-19 outbreak drags, a gradual recovery is likely from H2FY21 led by a low base, better rural sentiment and pent-up demand. We believe recovery to be sooner in PVs, premium motorcycles and tractors," Emkay Global said in the report. IAS SHW ANUANU