Goldman Sachs Previews Indian Auto Q1 Results: Bullish on Eicher and Bajaj Outperformance Potential

Overview

This report previews the 2027 fiscal year Q1 performance for major Indian auto manufacturers and service providers (Hyundai India, Eicher Motors, Mahindra & Mahindra, Bajaj Auto, Tata Technologies). The report indicates that despite severe raw material cost inflation, automakers maintained strong sales volume and revenue growth through price increases and product mix optimization. Goldman Sachs expects revenue and EBITDA growth between 20% and 43% for Q1 across all companies except Hyundai India. The report focuses on analyzing earnings drivers, cost pressures, and export recovery for each company, adjusting target prices for select holdings.

Core views

Industry overall shows "volume up, profit down" trend. Entering FY27 Q1, Indian auto OEMs enjoyed strong sales momentum and partially offset heavy raw material cost inflation by raising prices. Among this group, Eicher Motors and Hyundai India have a more favorable product mix. Goldman Sachs expects revenue and EBITDA growth for Q1 to be between +20% and +43% for all companies except Hyundai India, where some sales were delayed to Q2 due to supplier production issues. Individual stock performance is highly differentiated. Goldman Sachs believes Eicher Motors and Bajaj Auto have potential for Q1 earnings to exceed Bloomberg consensus expectations. For Eicher Motors, better vehicle mix and a 170 basis points quarter-over-quarter price increase offset most of the approximately 350 basis points of commodity cost headwinds. Bajaj Auto benefited from favorable exchange rates (Rupee depreciation vs USD) supporting its large export business, as well as a 200 basis points price increase, but faced over 400 basis points of raw material cost headwinds and a decline in three-wheeler mix. Hyundai Motor India faces short-term challenges but has sufficient long-term catalysts. Due to supplier production issues, some of its current quarter's sales were pushed to Q2, leading to Q1 performance expectations below consensus. However, it has more new product launch catalysts than peers in FY27, and appears to begin filling high-margin export order backlogs in July. Therefore, Goldman Sachs raised its target price by 7% to 2350 Rupees. Tata Technologies showed steady business acquisition momentum even against the backdrop of global auto OEMs cutting guidance, so Goldman Sachs raised its target price by 9% to 510 Rupees. Regarding Mahindra & Mahindra (M&M), SUV business pricing increased by 100 basis points and discounts decreased, but negative impact of raw material inflation on profitability exceeded 200 basis points, target price held unchanged.

Analysis framework

Goldman Sachs adopts an integrated top-down and bottom-up analysis approach. First, identify key drivers at macro and industry levels, such as raw material cost inflation, exchange rate fluctuations, export infrastructure availability, and demand environment after macroeconomic disruption. Second, conduct detailed financial forecasting for each company, comparing Goldman Sachs estimates (GSe) with Bloomberg consensus (BBG Cons), analyzing YoY and QoQ changes in revenue, EBITDA, net profit, and margins. Finally, update target prices based on Sum-of-the-Parts (SOTP) or P/E valuation methods, and assess potential upside and downside risks.

Methodology notes

• Valuation MethodologySOTP Segment Valuation

  SOTP (Sum-of-the-Parts) Segment Valuation Method

  Valuing different business segments of a company (e.g., Automotive, Farm Equipment, Aerospace) separately and summing them up; suitable for diversified operating enterprises to reflect value of each part more accurately.

• Industry Analysis FrameworkVolume-Price Split

  Volume-Price Split Analysis

  Decompose revenue growth into volume growth and price changes to help identify if growth comes from market demand expansion or pricing power improvement, as well as cost pass-through effectiveness.

• Company Fundamentals and Financial Framework

  Consensus Expectation Comparison Analysis

  Compare institutional internal forecasts with market consensus expectations (Consensus) to find expectation gaps, thereby judging potential upside or downside risk for stock price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Eicher Motors (EICH.BO)

  Benefit: Product mix optimization and price increases effectively offset cost pressures; performance expected to beat consensus.

  Strengths

  Solid market position in premium motorcycle segment, strong export business, leading industry profit margins.

  Weaknesses

  Quarter-over-quarter decline in export mix ratio.

  Comparison

  More favorable product mix compared to peers for maintaining high gross margins.

  Risks

  Increased competition from new entrants in premium motorcycle market, slower-than-expected international and rural market promotion.

• Bajaj Auto (BAJA.BO)

  Mixed benefit/loss: Export business benefits from exchange rates, but dragged by high raw material costs.

  Strengths

  Large export business base, increasing mix of electric two/three-wheelers.

  Weaknesses

  Raw material cost headwinds exceed 400 basis points, three-wheeler mix ratio decline.

  Comparison

  High export proportion makes it sensitive to exchange rates, but cost pressure greater than peers.

  Risks

  Reversal of emerging export market recovery, delay in new model launches, slowdown in two/three-wheeler market demand recovery.

• Hyundai Motor India (HYUN.BO)

  Short-term loss/Long-term benefit: Short-term supply issues affect sales, but new product cycle and export backlog fill provide long-term support.

  Strengths

  More new product launch catalysts in FY27 than peers, improved SUV mix ratio.

  Weaknesses

  Sales delayed due to supplier production issues, quarterly decline in sedan and export mix ratios.

  Comparison

  Large short-term performance volatility, but long-term growth visibility higher than some peers.

  Risks

  High concentration on Creta/Venue models, intensifying SUV market competition, CO2 compliance risks.

• Tata Technologies (TATE.BO)

  Benefit: Still maintains business acquisition momentum against backdrop of global auto OEMs cutting guidance.

  Strengths

  Stable business acquisition momentum, potential acceleration in aerospace division.

  Weaknesses

  Dependent on R&D expenditure of global automobile manufacturers.

  Comparison

  Engineering services business is more countercyclical compared to traditional OEMs.

  Risks

  Further cutback of R&D budgets by global auto manufacturers, cash-out of CASE software opportunities falling short of expectations.

• Mahindra & Mahindra (MAHM.BO)

  Neutral: Price increases and reduced discounts offset some cost pressures, but margins still squeezed.

  Strengths

  Strong SUV business, stable profit contribution from farm equipment division.

  Weaknesses

  Impact of raw material inflation on profitability exceeds 200 basis points.

  Comparison

  Cyclicality of farm equipment business may bring fluctuations.

  Risks

  Cyclicality of farm equipment mix, order cancellations due to insufficient capacity.

Key data

• Bajaj Auto 1Q27E Revenue YoY Growth43%GS forecast, higher than Bloomberg Consensus
• Eicher Motors 1Q27E EBITDA Margin24.0%Down 86 bps qoq, but remains high
• Tata Technologies Target Price Adjustment510 RupeesRaised 9%, previously 470 Rupees
• Hyundai Motor India Target Price Adjustment2350 RupeesRaised 7%, previously 2190 Rupees
• Bajaj Auto Target Price Adjustment11500 RupeesLowered 2%, previously 11700 Rupees

Impact & implications

The report believes that while raw material cost inflation poses continuous pressure on margins, companies with strong brand power and product mix advantages (like Eicher and Bajaj) can offset some risks through price increases and export business. Short-term supply chain disruptions for Hyundai India do not change the logic of its long-term product cycle moving upwards. Resilience shown by Tata Technologies amidst industry headwinds indicates its independent growth logic as an engineering services provider is being verified. Investors should monitor the sustainability of raw material cost support in Q2 and the rebound strength of the export business.

Risks

• Continued raw material cost inflation unable to be fully passed through via price increases
• Export market recovery weaker than expected or reversal
• Supply chain disruptions causing production delays
• Macroeconomic turmoil affecting domestic consumption demand
• Intensified competition from new entrants in premium motorcycle market

What to watch

• Sustainability of raw material cost support in Q2
• Availability of shipping infrastructure for export business
• Changes in demand environment following recent macro disturbances
• Growth visibility for H2 FY27 on a high base
• Potential timing of the Eighth Pay Commission payments