Auto Sector Q4 Outlook: Emkay Predicts Four-Wheeler Surge with TVS Motor, M&M, and MSIL as Top Investment Picks

The Indian automotive sector is on the brink of moderate growth in the final quarter of FY25, as indicated by Emkay Global Financial Services. While the expansion rate has shifted from impressive double-digit increases to more stable high single or low double-digit figures, certain industry players like Eicher Motors, TVS Motor, Mahindra & Mahindra (M&M), and Maruti Suzuki are expected to shine in this period. With adjustments made to its ratings and forecasts, Emkay has considered the evolving demand landscape and global uncertainties impacting the market.

Two-Wheeler Segment: Eicher Motors and TVS Motor Lead the Way

The two-wheeler segment is projected to experience around 6% revenue growth in Q4FY25. This positive outlook is largely fueled by 20% growth at Eicher Motors and 11% at TVS Motor. Both companies have seen substantial volume increases—24% year-over-year for EIM and 15% for TVSL—while competitors like Bajaj Auto and Hero MotoCorp have struggled. Emkay notes that EIM’s share of premium models, particularly the Bullet series, has likely risen, contributing to a margin expansion of approximately 40 basis points. Meanwhile, TVSL’s success stems from a favorable sales mix in both domestic and export markets.

Four-Wheeler Segment: Mahindra & Mahindra and Ashok Leyland on the Rise

In the four-wheeler sector, Emkay anticipates an 11% year-over-year revenue growth, driven by robust sales from various original equipment manufacturers (OEMs). Mahindra & Mahindra and Ashok Leyland are expected to be standout performers, with M&M receiving a recent rating upgrade to ‘ADD’. A notable 18% increase in passenger vehicle volumes for M&M and a 3% rise for Maruti Suzuki highlights the sector’s resilience. M&M’s margins are expected to benefit from new electric vehicle launches, while Tata Motors experiences mixed results from its Jaguar Land Rover (JLR) division and domestic commercial vehicle operations.

Auto Ancillaries: Uno Minda Shines Amid Challenges

Emkay predicts a 7% revenue growth for auto ancillaries, slightly trailing behind OEMs. Challenges in the sector include a decline in tyre demand and slower growth for Bharat Forge (BHFC). As a result, Emkay has downgraded BHFC to ‘ADD’ and reduced its target price by 8% to ₹1,200, citing disappointing domestic and export performance. Conversely, Uno Minda has been upgraded to ‘ADD’ and is projected to outperform in Q4, benefiting from increased content per vehicle and ongoing premiumization trends.

Global Factors Impact Earnings Projections for FY26-27

In light of broader economic trends, Emkay has revised down its earnings estimates for FY26 and FY27 by approximately 4% across its coverage universe. This adjustment reflects concerns over sluggish domestic demand and global risks, including escalating tariff disputes and economic slowdowns in major export markets such as the United States. Companies with significant international exposure, including BHFC, SAMIL, and Suprajit, have faced sharper earnings cuts of 9% to 12%. However, the recent decline in stock prices has made valuations appealing for some firms, prompting upgrades for M&M and Uno Minda.

Stock Recommendations: Focus on Two-Wheelers and Key Players

Emkay maintains a strong preference for the two-wheeler sector, citing clear replacement demand, potential rural market revival, and emerging opportunities in the electric vehicle arena. Among passenger vehicle manufacturers, Maruti Suzuki stands out due to its promising upcoming ICE SUV launches, while Tata Motors remains an attractive investment at current JLR valuations. Within the ancillary market, Shriram Pistons and Pricol are also recommended. Top picks from Emkay in the automotive sector include Eicher Motors, TVS Motor, and Maruti Suzuki.