Revenue from auxiliary cars to increase in fiscal year 23, says ICRA

Auxiliary vehicle revenues are expected to grow 8-10% in 2022-23 amid steady demand and likely easing supply chain concerns in the second half of the year, Icra said on Monday.

At the same time, the sector’s coverage indicators are also likely to remain comfortable in 2022-2023, taking advantage of strong accumulations and relatively low additional debt financing requirements, the rating agency said in a statement.

In the last fiscal year, 31 automotive components companies with cumulative revenues of over Rs 1.75,000 reported 23% revenue growth on an annual basis, driven by local OEMs, replacement, export volumes and price gaps. of goods.

Although growth came at a relatively low level of fiscal year 21, the actual increase in revenue was better than Icra’s projections, in part due to better-than-expected exports and increased sales to offset the impact of higher inflation. raw materials and transportation costs, he said.

Icra’s assessment of operating margins for the financial year 2022 took into account the benefits of operational leverage.

However, unprecedented inflation in raw material costs and transport costs in the second half of 2022 to 2022 (October-March) and the inability to transfer fully and timely affected profit margins in the previous fiscal year, according to the report.

Operating margins for a sample of 31 automotive companies in 2022 were the lowest in five years, he added.
Icra expects ancillary vehicle revenues to grow by 8-10% in 2023, supported by stable demand as well as the expected easing of supply chain problems in the second half of 2023.

“In the long run, premium vehicles, a focus on localization, improved export potential and EV opportunities, leading to higher vehicle content, would lead to healthy growth for automotive suppliers, in our view,” Vinutaa said. S, Vice President and Head of Sector in Ikra.

According to her, auxiliary cars have shown an adequate liquidity position, especially among level I and level II players.
Icra expects coverage indicators for this sector to remain comfortable in the future, supported by strong accumulations and relatively low additional debt financing, she said.

The projected revenue growth for the sample in fiscal year 2022 was limited by factors such as semiconductor shortages, muted demand for bicycles and tractors, and the impact of geopolitical developments on international business, she said.
“However, the real revenues of the industry were supported by healthy exports and better sales. Icra’s sample of 30 companies (excluding a major auto parts supplier) reported operating margins of 10.6% for fiscal 2022, 10 basis points lower on an annual basis and 40 basis points lower than forecast, “he added. she.

Uncertainty about the front of the supply chain and cost inflation have led to higher stocks of auxiliary vehicles, with sampling levels highest at 31 March 2022 compared to the last four years.

However, the intensity of working capital remains comfortable, at levels below 10 percent, according to Icra.
It emphasizes that the operating profits for the sample were higher in the previous fiscal year compared to the 2020 and 2021 fiscal years, supported by strong revenues, despite a slight decline in operating margins.

Ikra said that while debt levels are increasing as working capital intensities, improving operating profits has led to good debt coverage for the industry.

He also said that the cost of capital expenditure of the auxiliary car sample for 2022 as part of their operating income is 5.9%, lower than pre-COVID levels of more than 7.5%, which is in line with estimates of Icra.

Gradual investments are mainly focused on capacity development – adding new products, developing products for engaged platforms and developing advanced technological and EV components – in contrast to the capacity expansion investments seen in the past.

In the future, the recently announced PLI scheme will help accelerate capital expenditures in the medium term, in addition to investment by new entrants to the EV segment, he said, adding that most Icra-rated automotive ancillary products are investment grade, reflecting sound credit profile.

Related Posts

Leave a Reply

Your email address will not be published.