In Q4FY14, automobile industry witnessed volume decline, despite excise cut to the tune of 4% and auspicious festival of Gudipadwa coming in during the quarter. Auto makers would witness dual negative impact on margins due to low volume and compensating dealers for excise reduction. Moreover, discounts continued at elevated levels, putting pressure on realization, according to Kary Stock Broking.

''We expect higher negative impact on margins for CVs while PVs would witness lower impact. We believe that two wheeler companies would be least impacted among all automobile companies.''

''We expect margin pressure across the board as commodity prices in the domestic market have not softened significantly, volumes moderated considerably especially in M&HCV segment and higher discounts prevailed during the quarter. Moreover, one-time dealer compensation for excise cut would hit the margins of these companies hard. Tata Motors' 21% YoY growth in top-line is backed by strong performance of JLR despite sluggish domestic volumes. However, adverse currency movement is expected to impact its margins sequentially. M&M's 7% revenue decline is due to 18% YoY decline in UV sales, despite tractors recording 11% growth. We expect flat to negative margins for all major companies except Tata Motors and Bajaj Auto (both the companies benefitted by INR depreciation). We expect higher margin decline to the tune of 485 bps, 305 bps and 152 bps YoY for Ashok Leyland, Maruti Suzuki and Hero MotoCorp respectively. We expect EBIDTA margin improvement of 100- 600 bps over next two years from current level,'' the broking firm said.

''We maintain our FY15E and FY16E estimates and retain our recommendation and target price on all the automobile stocks under our coverage. On account of expected recovery in domestic automobile industry, improvement in exports coupled with reasonable valuation, we reiterate 'Buy' recommendation on Tata Motors (TP: Rs 462), M&M (TP: Rs 1,100), Maruti Suzuki (TP: Rs 2,050), Bajaj Auto (TP: Rs 2,150) and Escorts (TP: Rs 165). We expect healthy volumes for two wheelers and M&HCVs, while, due to price run up and expensive valuation, we reiterate our 'SELL' recommendation on Ashok Leyland (TP: Rs 24), Hero MotoCorp (TP: Rs 2,210) and TVS Motor (TP: Rs 75),'' it opined.

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