>1QFY2010 AUTO EARNING REVIEW (SHAREKHAN)

Higher volumes and lower raw material cost drives growth

Key points
■ The Q1FY2010 results of the automobile sector were impressive, especially on the margin front. Overall, the automobile companies had a double push to the bottom line performance. The top line was driven by better volume growth and the margins got a fillip from softer
commodity prices. For the quarter, the net sales of the automobile companies in Sharekhan’s universe improved by 23.5% and their margins expanded by a healthy 380 basis points to 14.1%.

■ The revenues for the quarter indicated a strong performance across the two-wheeler and four-wheeler segments. Easing liquidity constraints combined with the positive effect of the recent government measures to boost the economy clearly had a positive impact on the volumes. The excise duty cut effected by the government in its various stimulus packages combined with the slew of new launches by the automakers positively affected the sales of four-wheelers and twowheelers.

■ On the margin front, the benefits of declining commodity prices and the cost efficiencies undertaken by the companies played an extensive role in expanding margins during the quarter. The adjusted profit after tax (PAT) of the companies in Sharekhan’s universe grew by 59.3% year on year (yoy).

To see full report: AUTO EARNING REVIEW