- A 21-23 per cent revenue growth could be expected next fiscal
- However, a crucial decline in the previous two financial years may bring back the FY22 growth to a low base
After two years of suffering huge losses caused by the economic slowdown brought about by the pandemic, the automotive components manufacturing sector could finally recover and witness a rebound in profits in the first two-quarters of FY22, a report by credit rating firm Crisil Ltd stated.
A 21-23 per cent revenue growth could be expected next fiscal, in addition to higher operating margins brought about by effective cost-controlling measures and growth in top line. The demand boost from original equipment manufacturers (OEMs) will positively impact the sector. This will bring about a fresh change to the industry that faced degrowth of 13 per cent and 8 per cent in fiscal 2020 and 2021.
The report further added replacement demand, which had taken a hit due to the restrictions imposed during the pandemic, will recuperate gradually. Steady demand from the US, along with a staggering recovery in the European Union, will help in aiding exports.
Growth decline in FY22
Despite higher demand, a crucial decline in the previous two financial years may bring back the FY22 growth to a low base. Capacity utilization of component suppliers can be expected to remain below 2019 levels.
After a decrease of 150 bps in FY20 and 200-250 bps in FY21, the operating margin will rise by only 100-150 basis points (bps) to 10% in FY22. This is lead to operating profit being lower than FY19.