Axis Securities expects positive Q2 for auto sector; prefers TVS, Eicher, Hero MotoCorp among OEMs

Axis Securities expects the automobile sector to report positive earnings for the second quarter of FY26, supported by improving domestic demand, the recent GST rate cut and festive season-driven purchases. The domestic brokerage said the tractor segment is likely to outperform two-wheelers (2Ws), passenger vehicles (PVs) and commercial vehicles (CVs), aided by favourable monsoon conditions and higher water reservoir levels, which are expected to lift rural sentiment.

In its Q2 FY26 results preview for the select segment, Axis Securities said the recovery in export volumes is strengthening earnings visibility for FY26 and beyond. PV sales are likely to see improvement on a high base, with new SUV launches from select original equipment manufacturers (OEMs) expected to drive growth. Demand for entry-level vehicles is also anticipated to rise further following the GST rate reduction.

Axis sees mid-single-digit growth for CVs and high single-digit to low double-digit growth for 2Ws and tractors in the near term. The brokerage said the GST rate cut, income tax relief, wedding season demand, possible 8th Pay Commission announcement and rural-focused government measures may support rural recovery in the coming months.

"We remain selective in our approach towards OEMs under coverage," Axis noted. It identified TVS Motor Company, Eicher Motors (Royal Enfield's parent), and Hero MotoCorp as its top earnings plays among auto OEMs for Q2 FY26. In the auto ancillary space, its preferred picks include Sansera Engineering Ltd, Endurance Technologies and Minda Corporation.

For the 2W segment, Axis expects EBITDA margins to expand by 122 basis points (bps) and 46 bps year-on-year (YoY) for TVS and Hero MotoCorp, respectively, while Eicher Motors may witness a 147 bps YoY decline.

Among ancillaries, Endurance Tech's revenue is projected to rise around 16 per cent YoY and 2 per cent quarter-on-quarter (QoQ), driven by robust domestic 2W demand and expansion in its ABS and alloy wheel segments.

Minda Corp's revenue is seen growing about 14 per cent YoY, led by 2W and tractor growth and improving PV and CV demand. Sansera Engg's revenue is expected to increase around 9 per cent YoY and 8 per cent QoQ.