BMW recently cut its EBIT margin guidance for 2024 to between 6% to 7% from the 8% to 10% range earlier. EBIT margin for the motorcycle segment is also likely to be in the same range from the 8% to 10% range earlier.
Sluggish demand in the Chinese market and problems related to a braking system supplied by Continental are some of the reasons cited by BMW for cutting its guidance.
Analysts expect that stocks like Samvardhana Motherson may see some impact in their operations in the second half of the current financial year due to the BMW guidance cut.
Samvardhana Motherson has 5% of its consolidated topline coming from BMW, while the Chinese market comprises of 11% of its topline.
For companies like Rico Auto, BMW contributes nearly 11% of its topline, while for Suprajit Engineering, that number stands at 4%.
Other companies who have an exposure to BMW include the likes of Ceat, Goodluck India, Minda Corp, Apollo Tyres.
The weakness in the European Union and the Chinese markets was already highlighted by the management of JLR. But JLR’s retail sales have been better compared to peers and analysts believe that the company’s 3.5% year-on-year revenue growth guidance is de-risked.
However, brokerage firm UBS believes that it sees further downside risk for a margin slippage at JLR and within the Indian Passenger Vehicle business for Tata Motors on any significant shortfall in performance.
Therefore, UBS has maintained its “Sell” rating on Tata Motors with a price target of ₹825.
Shares of Samvardhana Motherson are currently trading 2.5% lower at ₹184.81. The stock though, has risen 75% so far in 2024.