The Economic Times (Mumbai) - Top Indian auto parts makers are on track to report a stellar first quarter, as robust after-sales demand and growing exports help them shrug off slowing auto sales at home.
Motherson Sumi Systems is likely to see quarterly net profit doubling in April-June boosted by earnings at an overseas subsidiary, Bharat Forge could see profit rising more than a third, while Exide Industries may report a 10 percent rise in profit, a Reuters poll of brokerages showed. .
"The revenue growth rate of auto ancillary companies is expected to be in line with auto OEMs (original equipment manufacturers). However, auto ancillary companies with exposure to replacement market and export are expected to report better growth rate," brokerage Batlivala & Karani said in a report.
Indian car sales, which grew at a breakneck 30 percent in the fiscal year that ended in April, are now expected to grow by just 10 to 12 percent in FY12, down from an earlier forecast of 16 to 18 percent, industry group the Society of Indian Automobile Manufacturers forecast.
Car sales in Asia's third largest economy, which in June saw their slowest pace of growth since March 2009, are driven by a burgeoning middle class that relies on bank loans for purchases.
But India's central bank has raised interest rates 10 times since March last year in an effort to battle stubbornly high inflation, a move that has hurt credit-based purchases.
The growth of the Indian auto component industry is directly linked to the auto sector's growth and with OEMs accounting for more than 70 percent of domestic sales.
"All three companies which are leaders in their respective space, Bharat Forge, Motherson Sumi and Exide, should report better set of numbers simply because of their market leader position in their respective segments though comparatively for the sector there might be some margin pressure," said Surjit Arora, analyst at Prabhudas Lilladher.
Motherson Sumi, the world's largest maker of rear view mirrors, may see consolidated quarterly net profit doubling to about 1.2 billion rupees on net sales of 22.9 billion rupees.
"For Motherson Sumi, we are expecting an improvement in margins compared to the year-ago quarter, mainly due to the improvement in operating performance at SMR. They are in the process of turning around that business and margins are improving at SMR," Angel Broking analyst Yaresh Kothari said.
The company, which also makes wiring harness and high-tension cords, had acquired Europe-based Visiocorp's rear view mirror business in 2009 and renamed it Samvardhana Motherson Reflectec (SMR). Motherson had undertaken an elaborate restructuring of the subsidiary's assets in Europe and Australia, leading to an improvement in margins.
Lower depreciation and a pick-up in exports will also help Motherson Sumi's performance, analysts said.
