-
Auto sector Q2 outlook: Axis Securities expects positive earnings for the second quarter of FY26, supported by improving domestic demand and GST rate cuts.
-
Auto OEM picks: TVS Motor, Eicher Motors, and Hero MotoCorp are preferred for strong earnings potential.
-
Auto ancillary growth: Sansera Engineering, Endurance Technologies, and Minda Corporation are expected to benefit from robust vehicle demand.
Auto sector Q2 is expected to report strong earnings, according to Axis Securities. The domestic brokerage expects the automobile industry to perform positively in the second quarter of FY26. Growth is likely to be driven by improving domestic demand, a recent GST rate reduction, and festive season-related purchases. These factors are anticipated to encourage both urban and rural buyers, supporting overall industry growth.
Axis Securities outlook highlights that the tractor segment is likely to outperform other categories like two-wheelers (2Ws), passenger vehicles (PVs), and commercial vehicles (CVs). Favorable monsoon conditions and higher water reservoir levels are expected to boost rural sentiment, increasing demand for tractors and other rural-focused vehicles. The positive rural environment is likely to provide a strong tailwind for sales in the coming months.
Auto sector Q2 export recovery is strengthening earnings visibility for FY26 and beyond. Axis Securities noted that export volumes for select vehicles have been improving, which adds stability to earnings expectations. Passenger vehicle sales are expected to improve despite a high base in the previous year. New SUV launches from top original equipment manufacturers (OEMs) are likely to attract buyers, while demand for entry-level vehicles is expected to rise further following the GST rate cut.
Axis Securities growth forecast anticipates mid-single-digit growth for commercial vehicles and high single-digit to low double-digit growth for two-wheelers and tractors in the near term. Several factors, such as income tax relief, wedding season demand, potential 8th Pay Commission announcements, and rural-focused government initiatives, are expected to support demand in rural areas. These measures may accelerate recovery for both the auto and allied industries.
Auto sector OEM preferences from Axis Securities focus on select top performers. The brokerage identified TVS Motor Company, Eicher Motors (parent company of Royal Enfield), and Hero MotoCorp as its preferred OEMs for Q2 FY26 earnings. These companies are expected to benefit from steady demand in both urban and rural markets, strong operational performance, and product launches that appeal to consumers.
Axis Securities two-wheeler margins are expected to improve for TVS Motor and Hero MotoCorp. EBITDA margins for TVS are likely to expand by 122 basis points, while Hero MotoCorp may see a 46 basis points year-on-year increase. In contrast, Eicher Motors may witness a 147 basis points YoY decline in margins due to higher costs and operational pressures. These projections help investors understand potential profitability trends across key players in the 2W segment.
Auto sector ancillary growth is also expected to be robust. Among auto ancillaries, Endurance Technologies is projected to see revenue growth of around 16% YoY and 2% quarter-on-quarter (QoQ). Strong domestic two-wheeler demand and expansion in ABS and alloy wheel segments are the main drivers of this growth.
Axis Securities ancillary outlook includes Minda Corporation and Sansera Engineering as top picks. Minda Corp’s revenue is projected to grow about 14% YoY, driven by growth in two-wheelers, tractors, and improving demand for passenger and commercial vehicles. Sansera Engineering’s revenue is expected to increase around 9% YoY and 8% QoQ, supported by strong domestic demand and capacity expansions. These companies are well-positioned to benefit from the overall growth in vehicle production and sales.
Auto sector Q2 overall performance is expected to reflect steady demand, driven by festive season purchases, rural recovery, and government incentives. The combination of higher domestic consumption, favorable GST policies, and export recovery is likely to create a positive earnings environment for both OEMs and auto ancillaries. Analysts expect these trends to continue into the second half of FY26, making the sector attractive for investors.
Axis Securities investor strategy emphasizes a selective approach toward auto OEMs and ancillary companies. By focusing on top-performing names such as TVS, Eicher, Hero MotoCorp, Sansera Engineering, Endurance Technologies, and Minda Corporation, investors can benefit from companies with strong operational performance and growth visibility. This selective focus aims to maximize returns while managing risks associated with broader market fluctuations.
In conclusion, auto sector Q2 earnings are expected to be positive, with growth driven by domestic demand, GST cuts, rural sentiment, and festive season purchases. Axis Securities has highlighted specific OEMs and ancillaries that are likely to outperform, making them preferred picks for investors looking to capitalize on the sector’s recovery. The combination of favorable market conditions and targeted company performance is expected to support earnings visibility for FY26 and beyond.
