Automobile Sector Back On Track ?

Recovery for the automobile sector after lifting of lockdown has been stronger than expected. Brokerage firms are optimistic, but they advise investors to remain cognizant of retail auto sale risks.

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Some Financial Services predicts that the second quarter (Q2) of FY 2021 could mark the beginning of a margin recovery phase after eight straight quarters of year-on-year (Y-o-Y) decline in earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins.

“This recovery phase can be attributable to the pent-up demand, positive agri-economics, and a moderate shift from public to private transport. Demand has largely normalised for two-wheelers and passenger vehicles in Q2 FY 2021.” Jinesh Gandhi, Deputy Head of Research, Motilal Oswal Financial Services.

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“Some sectors have shown signs of recovery in the second quarter. Growth in passenger vehicles and two-wheeler segments is positive, although on a very low base,” said Rajesh Menon, Director General at SIAM.

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