12-Oct-2026 08:03:55
CLSA on Autos
NIFTY Auto Index has corrected c.17% over past two months despite retail demand momentum remaining robust Believe this is driven by profitability fears amidst commodity inflation, fears of demand getting impacted with frequent price hikes and de-rating driven by growth rationalisation post GST cut rebasing Though interactions with investors suggest concern about growth rebasing post GST rate cut from October, this is neither new nor unexpected. In fact, OEMs at HK conference in September reiterated confidence in delivering mid- to high-single-digit growth in 2HFY27. As a result, sector now offers attractive risk-reward with several OEMs trading at compelling valuations even under conservative assumptions for FY28 (assuming after-effects of persistence of commodity inflation) M&M stands out amongst OEMs, trading at c.15x FY28CL core EPS, assuming 10% tractor decline in FY28 & continuity of benign Ebit margin across segments Maintain HC O-PF rating on M&M, as believe benign c.10% EPS Cagr under a conservative scenario is well priced