Q3FY2011 Auto earnings review

The third quarter of the financial year 2011 was a great challenge for the auto mobile firms recently. The reason for it is that the company witnessed a challenge in operating the environment. The companies have used per auto mobile contribution as a vital measuring tool to measure the profitability however the operating flexibility was kept intact.

Tata Motors, Mahindra & Mahindra and Bajaj Auto performed outstandingly. The 2011Q3 revenues of the auto motive companies as per the experts helped in rising the volume in the market. The net sales of the auto mobile firms raised by 25.6 per cent on year on year basis. While the operating profit declined by 2.1 per cent on YoY basis which is reasoned as the increase in cost of production.

The component such as natural rubber increased by more than 64 per cent on YoY. The auto companies were surprised by the constant price hike. The profit after tax (PAT) raised by 14.5 per cent on Year on Year basis, despite the decline in earning before interest, tax depreciation, and amortization (EBIDTA).

It is on the account of the higher other income, lower taxes (fiscal and research and development (R&D) benefits) and also the higher capitalisation on the account of ongoing capital expenditure (capex) programs. Amongst the original equipment manufacturers(OEMs), Bajaj Auto and Tata Motors outperformed in the market however Greaves Cotton outperformed in the auto ancillary market.

In the fourth quarter of the fiscal year 2011, the auto motive industry is eying a great growth. It can be seen in the increasing volumes in January 2011. The industry enjoyed the price hikes in between 1 to 2 per cent. It is being expected that the operating margins will improve gradually meanwhile the price hike will be constantly in vogue.

Apollo Tyres and Ashok Leyland are likely to lead the earning per share (EPS) growth by 2012 fiscal year. The capacity expansion, better usage reason to the wage settlement and full effect of the hike in prices will be optimistically observed by Apollo Tyres in 2012 FY. While Ashok Leyland will be benefited from the higher localisation at Uttrakhand.

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