Mumbai, January 13: Auto parts makers are expected to report higher earnings in October-December on the back of a recovering domestic market, which has seen vehicle sales jump to record levels, analysts said.
Firms such as Motherson Sumi Systems, Bharat Forge and Amtek Auto Ltd are seen posting higher profits as stimulus packages by the government and low interest rates drive volumes, though exports are yet to recover fully.
“There has been an increase in production schedules at auto component firms post June quarter, following the two government stimulus packages and substantial improvement in the volumes of auto companies,” brokerage Prabhudas Lilladher said in a report.
“Though global recession had affected the Indian auto components industry, it is now slowly coming back on track,” the report said.
Bharat Forge, India’s top forgings maker, is likely to see net profit surge to 335 million rupees in Oct-Dec from about 44 million rupees a year ago on better sales and lower input costs, a Reuters poll of brokerages showed.
“Bharat Forge’s improved profits will be mainly because of recovery in the domestic market. There could be a 25 to 30 percent jump in domestic revenues sequentially,” said an analyst with a local brokerage who declined to be named.
“Compared to last year raw material costs, particularly steel, are lower, though sequentially they are rising. But topline is sequentially improving substantially and that growth is so robust it takes care of all the costs,” the analyst added.
Steel prices have fallen in the second half of (calendar) 2009 versus the same period a year ago as producers cut prices due to a slump in demand and weak global prices.
Sales of trucks and buses, a gauge of economic activity, was up 171.6 percent at 48,614 units in December from 17,897 units a year earlier, while car sales rose an annual 40.3 percent in December 2009.
“Sustained domestic CV (commercial vehicle) offtake and an improved performance from overseas subsidiaries (are) likely to boost earnings,” for Amtek Auto Ltd and Bharat Forge, a report from IDFC-SSKI said.
Amtek’s consolidated net is seen nearly tripling to 404 million rupees on sales of 8.5 billion rupees, the poll showed.
Motherson Sumi will see a surge in sales boosting its net profit, mainly due to the acquisition of European Visiocorp’s rear view mirror business in March last year, though the growth in net will not keep pace with zooming sales, analysts said.
Motherson is restructuring some international operations of Visiocorp, and the costs will weigh on profit margins in FY10.
“Visiocorp is the main topline driver for Motherson. The margin estimates have been pretty conservative,” said Vaishali Jajoo, an analyst at Angel Broking.
Motherson is expected to report a 87 percent rise in consolidated net profit to 476.33 million rupees while sales may soar 214 percent to 17.11 billion rupees.
–Agencies