As the auto industry of India enters the first quarter earnings season of FY26, the brokerage firm Jefferies in its latest report has highlighted a mix of optimism and caution about this sector. The brokerage has added Mahindra & Mahindra, TVS Motor Company, and Belrise Industries as its top picks.
Let’s take a look at why Jefferies remains upbeat on select auto names and where it expects the pressure to mount.
Jefferies on Autos & Auto Parts: Earnings growth slows, but strength remains
According to Jefferies, the overall growth momentum for auto OEMs (excluding Tata Motors) is expected to cool off in Q1FY26, with EBITDA and pre-exceptional PBT growth slowing to just 1-2% year-on-year. In contrast, Q4FY25 had posted growth between 9-11%.
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However, the report pointed out that “there is a big growth divergence across OEMs.” While Mahindra & Mahindra (MM) and TVS Motor Company (TVSL) are projected to post EBITDA growth of 22-29% YoY, companies like Hyundai, Maruti Suzuki (MSIL), and Tata Motors (TTMT) may see a steep drop ranging from 10-28% YoY. Hero MotoCorp (HMCL) is likely to witness a 4% decline.
Jefferies on Autos & Auto Parts: Segment trends – Tractors up, PVs and two-wheelers lag
The brokerage further in its report noted a mixed wholesale volume trends across the auto industry. Tractor sales rose by 8% YoY during Q1, but segments like two-wheelers, passenger vehicles, and trucks recorded volume declines of 1-6% YoY.
The brokerage expects revenue for its coverage universe (excluding Tata Motors) to grow 7% YoY in Q1, driven by 12-25% YoY growth for Escorts Kubota (EIM), Mahindra & Mahindra, and TVS Motor Company.
For Tata Motors, JLR shipments (excluding its China JV) fell 11% YoY and were down 22% QoQ, further dampening prospects.
Jefferies on Autos & Auto Parts: Margins and profitability outlook
The brokerage estimates that EBITDA margins for covered OEMs (excluding Tata Motors) will shrink by 40 basis points sequentially to 13.7% in Q1FY26. Among component makers, Jefferies expects Belrise Industries to outperform with 13% YoY EBITDA growth, while Bharat Forge, Motherson, and Sona Comstar may report declines between 6-17%.
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