Motilal Oswal sees Maruti Suzuki, Endurance Technologies as top bets in post-GST auto rebound

The Indian automobile sector has entered a phase of cautious optimism following the Goods and Services Tax (GST) rate cuts that reignited demand across segments.

Investor sentiment, particularly among foreign institutional investors (FIIs), has turned constructive as volume growth rebounds on the back of festive momentum, price reductions, and improving rural sentiment.

The most visible impact of the tax reduction has been in the entry-level passenger vehicle and two-wheeler categories, where effective price cuts ranging between eight and fifteen percent have significantly lifted consumer interest.

Original equipment manufacturers (OEMs) report robust bookings through the Navratri period, with deliveries and footfalls nearly doubling year-on-year in certain segments.

This rebound, however, has been supported by attractive discounts and deferred financing schemes, leading to investor caution on whether demand will sustain once these incentives taper off in early calendar year 2026.

Passenger vehicle volumes are projected to grow by over eight percent in financial year 2027, with utility vehicles expected to remain the key driver of expansion.

The two-wheeler segment is witnessing an encouraging pickup in both motorcycles and scooters, while electric variants continue to hold share despite the rate adjustments.

In contrast, the commercial vehicle (CV) segment remains at an inflection point, with investors closely tracking early signs of revival.

Improved pricing discipline and deleveraged balance sheets have strengthened industry fundamentals, though concerns linger over long-term structural shifts such as the impact of the Dedicated Freight Corridor (DFC) on freight demand.

Auto component manufacturers continue to grapple with tariff-related uncertainty, which has complicated margin assessment and investor valuation.

Segments tied to commercial vehicles and exports are facing the brunt of this volatility, while domestic-focused players are seeing modest gains as OEM production ramps up.

Overall, the medium-term outlook for the auto industry remains favorable, underpinned by lower vehicle prices, festive-led retail buoyancy, and strong export traction. Yet, the key test lies in sustaining demand beyond the seasonal spike.

With the Auto Index recently outperforming the Nifty after a prolonged lag, investors appear poised but prudent—awaiting evidence that the post-GST momentum marks the beginning of a durable growth cycle rather than a temporary surge.

Maruti Suzuki: Buy| Target Rs 18,501

A richer product mix with higher SUV, CNG, and export contributions continues to drive Maruti Suzuki’s growth trajectory. The CNG mix rose to thirty-five percent, led by robust demand for SUV CNG models post-GST cuts.

Healthy EBITDA margin of 10.4 percent reflects favorable mix and cost discipline. Profit after tax grew two percent year-on-year to ₹37.1 billion, aided by higher other income from forex and commodity hedge gains.

Exports surged thirty-seven percent year-on-year, highlighting strong overseas demand. With upcoming SUV launches, including the e-Vitara, and effective supply chain management, the company remains well-positioned for steady domestic and export-led expansion.

Endurance Technologies: Buy| Target Rs 3311

Endurance aims to ramp up its 4W mix to 45% of consolidated revenue from 25% currently. To achieve this target, it is setting up a new plant in Maharashtra to fulfil new orders and has tied up with a Korean partner to foray into 4W suspensions.

The proposed 100% Anti-lock brake system (ABS) mandate for 2Ws from Jan’26 could expand Endurance’s addressable market nearly tenfold.

With established ABS capabilities and backward integration, the company targets a 25% share of this enlarged market, a major upside catalyst.

It is set to sustain its industry-leading performance with a robust INR 36.1 billion order backlog, driving ~18%/21%/20% CAGR in revenue/EBITDA/PAT over FY25–27. Endurance consistent outperformance in both domestic and European markets underscores operational strength and execution excellence.

(The author is Head – Research, Wealth Management, Motilal Oswal Financial Services Ltd)

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