Why Jefferies Believes M&M, TVS Motor and Belrise Will Lead the Auto Sector in FY26

As the Indian auto sector gears up for the Q1 earnings season of FY26, brokerage firm Jefferies has taken a closer look at the performance trends and future outlook of major players. While the overall picture for the automobile and auto components industry is one of slowing growth, Jefferies remains bullish on three key names that continue to demonstrate strength and resilience. The brokerage has identified Mahindra and Mahindra, TVS Motor Company, and Belrise Industries as standout picks that are likely to outperform their peers in both profitability and growth metrics.

The broader industry has been facing a deceleration in earnings momentum. Compared to the fourth quarter of FY25, which saw earnings before interest, tax, depreciation and amortisation and pre exceptional profit before tax grow by around ten percent year on year, the first quarter of FY26 is expected to show a sharp decline. Jefferies estimates that EBITDA and pre exceptional profit growth across auto manufacturers, excluding Tata Motors, will shrink to just one to two percent. However, this slowdown is not uniform. In fact, Jefferies notes a significant divergence in growth patterns across different manufacturers.

Mahindra and Mahindra and TVS Motor Company are projected to post EBITDA growth ranging between twenty two to twenty nine percent compared to the same period last year. This stands in stark contrast to companies like Hyundai, Maruti Suzuki, and Tata Motors, which could see a double digit contraction in earnings. Hero MotoCorp is also expected to see a marginal dip. The numbers indicate that while the sector may seem to be cooling off on the surface, a few companies are still riding strong tailwinds.

From a segment perspective, the trends have been mixed. Tractor sales have shown robust growth, with an eight percent year on year increase in Q1 volumes. However, sales of passenger vehicles, two wheelers, and commercial trucks have declined by anywhere between one to six percent. This uneven performance is mirrored in the financials. According to Jefferies, revenue for its auto coverage universe, excluding Tata Motors, is expected to grow by seven percent in Q1. This growth will primarily be led by companies like Escorts Kubota, Mahindra and Mahindra, and TVS Motor.

In contrast, Tata Motors is expected to face headwinds. Jaguar Land Rover shipments, excluding those from its China joint venture, fell by eleven percent year on year and twenty two percent quarter on quarter. This decline could weigh down the company’s overall performance for the quarter.

On the profitability front, Jefferies expects EBITDA margins for auto manufacturers, excluding Tata Motors, to contract by about forty basis points on a sequential basis, bringing the average margin down to thirteen point seven percent. Among auto parts companies, Belrise Industries stands out as the expected outperformer with a projected thirteen percent year on year growth in EBITDA. Other component makers such as Bharat Forge, Motherson, and Sona Comstar may report year on year declines ranging from six to seventeen percent.

Looking at the bottom line, pre exceptional profit before tax across the sector is projected to grow by just one percent year on year. Once again, Mahindra and Mahindra and TVS Motor are expected to beat the trend with growth of fifteen to thirty three percent. On the other hand, companies like Hyundai, Maruti Suzuki, and Tata Motors are likely to report sharp drops in profit before tax.

Jefferies believes that despite the near term slowdown, the medium term outlook for the auto sector remains strong. The brokerage points to factors like expected income tax cuts, improved liquidity conditions, and potential public sector wage hikes in FY27 as tailwinds that could support further growth. As such, its confidence in Mahindra and Mahindra, TVS Motor, and Belrise Industries appears to be grounded in both current performance and future potential.

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