Automotive Axles Limited — Q2 FY26 earnings call

Call held 31 Oct 2025

Management summary

Automotive Axles Limited reported a Q2 FY26 revenue of INR470 crores, a 6% sequential decline, but achieved a robust EBITDA margin of 12.4%, an improvement from previous quarters, partly due to one-time gains and better export mix. The company successfully launched new products, including electric vehicle axles and a 15-meter bus axle, and expects strong performance in the latter half of the fiscal year. Despite market headwinds and product mix challenges, management remains confident in maintaining margins and market share, while acknowledging a potential 5-7% volume decline for the next fiscal year.

Highlights

  • Q2 EBITDA margin improved to 12.4% from 11.7% QoQ and 11.4% YoY, partly due to export mix and FX benefits.

  • Successfully launched a 15-meter bus axle and two new electric vehicle axle families (4x2 electric tractor trailer, 8x4 electric tipper).

  • Secured a silver award for Superlative Supplier Category for Aftermarket Performance from Ashok Leyland, achieving 98-90% delivery performance.

  • Management expects Q3 and Q4 FY26 to end "very strongly, probably better than last year."

  • Noted a structural shift in MHCV cyclicality, with variations now expected within 10%, down from 15-20% previously.

Concerns

  • Q2 FY26 revenue declined by 6% QoQ to ₹470 crores.

  • Product revenue for H1 FY26 was down by 4%.

  • Forecast for next fiscal year's volume indicates a potential decline of 5-7%, though this is debated and could be 2-3% depending on GST sentiment.

  • Product mix shifts, such as increased 4x2 tractor sales (requiring fewer axles), impacted overall axle volume despite OEM production growth.

Key financials

2 periods

Headline

  • Revenue
    ₹470 Cr
    QoQ -6%
  • EBITDA Margin
    12.4%
  • Half Year Revenue
    ₹969 Cr
  • Normalized EBITDA Margin
    11.8%

H1 FY26

  • Product Revenue
    —
    YoY -4%

What they filed

Q1 FY27: revenue up 5.7%, net profit up 27.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue495 531 560 489 462 −7%562 +6%664 +19%517 +6%
EBITDA51 57 63 48 48 −6%64 +12%77 +22%60 +25%
Net profit36 40 46 36 36 +0%39 −2%54 +17%46 +28%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Volume

  • MHCV Volume Decline (Next Fiscal Year) Volume · Next year (FY27) · Medium confidence 5% to 7% down

    Previously 5%, 6% down → 5% to 7% down

    Right now, we think it is about 5% to 7%. ... But our early forecast was, we may be around 5%, 6% down, but that may cut down to 2%, 3%.

    — Kishan Kumar, Nagaraja Gargeshwari

Profitability

  • EBITDA Margin Profitability · Ongoing · Medium confidence mid-teens level, 13-plus percentage
    Like a few quarters ago we were guiding for the EBITDA margin to reach at the mid-teens level, 13-plus percentage. So are we on track on this journey, sir? My answer to you is yes. ... Definitely, we are on the track, absolutely.

    — Ranganathan S.

Overall Performance

  • Q3 and Q4 FY26 Performance Overall Performance · Q3 and Q4 FY26 · Medium confidence ending very strongly, probably better than last year
    And going forward also, we expect the Q3 and Q4 to be ending very strongly, probably better than last year, that is what we are expecting.

    — Kishan Kumar

What to watch in Q3 FY26

MHCV Volume for Q3/Q4 FY26

Q3 and Q4 FY26
Current Q2 FY26 volume 95,000-98,000 units, with headwinds.
Target ending very strongly, probably better than last year

Why it matters

Management expects strong recovery in H2, which is crucial for overall FY26 performance and fixed cost absorption.

And going forward also, we expect the Q3 and Q4 to be ending very strongly, probably better than last year, that is what we are expecting.

Risks & concerns

  • Next Fiscal Year Volume Decline

    medium

    Initial forecast of 5-7% volume decline for next year, potentially improving to 2-3% depending on GST impact.

    Management acknowledged

  • Product Mix Shift Impact on Axle Volume

    medium

    Shift towards vehicles requiring fewer axles (e.g., 4x2 vs 8x2) can impact overall axle volume even if OEM vehicle production increases.

    Management acknowledged

  • Export Market Slowdown & Tariffs

    medium

    US market down 30-40% and tariff conditions are affecting exports, impacting top line.

    Management acknowledged

Q&A highlights

5 direct, 1 evasive
MHCV Cyclicality and Replacement Demand Direct
the cyclicality is now I would say, is between -- within 10%, not like the earlier times when we used to see 15%, 20% and more.

Management indicates a structural shift in MHCV market cycles, suggesting more stability and less volatility, which is a key long-term positive.

Asked by Radha from B&K Securities

Revenue Decline vs. Industry Growth & Export Impact Partial
because we are kind of concentrated in few of the customers, to some extent the product mix and their overall sales also kind of affected us. You are aware that the -- Europe is very stable, but North America, especially the M&HCV market is down. So, it also had some impact on our top line.

Explains the company's revenue underperformance relative to broader MHCV production growth, attributing it to product mix, customer concentration, and export market slowdowns, rather than market share loss.

Asked by Amit Hiranandani from PhillipCapital

Entry into Dead Axles for Tractor Trailers Direct
Probably over 1 year because we do have to do our own validation which can go up to 12 to 18 months. But definitely, it will be much faster than probably developing something from the scratch.

Reveals the company's strategic consideration and timeline for entering a new product segment (dead axles), indicating future growth avenues.

Asked by Shubham Batra from Ambit AMC

Impact of GST Reduction and Fleet Utilization Direct
About 75% is right now where the fleet utilization is, with the good fleet.

Provides insight into the current health and efficiency of the fleet operator segment, which directly impacts demand for new vehicles and components.

Asked by Abhishek Jain from AlfAccurate Advisors

Product Mix Impact on Axle Volume (Ashok Leyland Example) Direct
Ashok Leyland, it is a number of vehicles are increasing. But our axles will be 1 instead of 2 or 2.5.

Clarifies how changes in OEM product mix (e.g., more 4x2 vs 8x2 vehicles) can lead to lower axle volumes for the company even if the OEM's overall vehicle production increases, explaining a potential disconnect in reported numbers.

Asked by Nikhil from SiMPL

Timeline for Mid-Teen EBITDA Margins Partial
Yes. You see the -- you have full fledged analysts with you. So you can just put the volume change and look at the numbers. Definitely, we are on the track, absolutely.

Reaffirms commitment to margin targets but links achievement directly to volume recovery, suggesting that while the company is structurally on track, market conditions are a key variable.

Asked by Nishi Shanklesha from Sapphire Capital

Impact of Meritor HVS Arrangement Change on Revenue Evasive
You're putting so much assumption to it. The 10% that we have been -- explained in the previous calls also. Meritor HVS revenue has got their own aftermarket revenue, which is still a big part of the business. So, what we migrated the entire OEM, what we are selling to customers, which migrated to automotive axle.

Analyst questioned why revenue didn't increase more significantly after direct sales, suggesting a potential negative impact. Management's response was somewhat defensive, highlighting complexities and aftermarket revenue, but not fully clarifying the analyst's concern about the magnitude of the revenue shift.

Asked by Ravi Purohit from Securities Investment Management

American Axle Acquisition by Bharat Forge and Shareholder Interest Direct
But there's nothing to do with the American Axles or any other governance issue. I rest assured that shareholders' interest of this organization is utmost concern for us, and we never do anything against the shareholders' interest.

Addresses a direct concern about potential conflicts of interest or negative impacts on Automotive Axles due to a related-party acquisition, with management providing a strong assurance of independent governance and shareholder focus.

Asked by Ravi Purohit from Securities Investment Management

2 min read 6 chapters

Detailed narrative

Q2 FY26 Financial Performance Overview

Automotive Axles reported a Q2 FY26 revenue of INR470 crores, marking a 6% sequential decline from the previous quarter. Despite this, the company achieved an EBITDA margin of 12.4%, an improvement from 11.7% in Q1 FY26 and 11.4% in Q2 FY25. This margin performance was supported by a favorable export revenue mix and foreign exchange benefits, alongside some one-time write-offs of unrequired liabilities, which, when normalized, would place the EBITDA margin at 11.7-11.8%.

Market Dynamics and Cyclicality Shift

Management noted a significant change in the cyclicality of the MHCV industry, with variations now expected to be within 10%, a reduction from the earlier 15-20%. The market has remained stable in the 400-420 thousand unit range for the past 3-4 years, with the next peak projected for 2029-2030 at 480-500 thousand units. This stability is attributed to factors like improved infrastructure, GST simplification, and the increasing demand for heavier vehicles.

New Product Launches and EV Readiness

In Q2 FY26, Automotive Axles successfully launched a 15-meter bus axle, which entered production, and migrated an older export product to a new, already productionized platform. Crucially, the company introduced two new families of axles for electric vehicle applications: a 4x2 electric tractor trailer and an 8x4 electric tipper, demonstrating readiness for the evolving EV market. Testing is underway for 9 and 12-meter bus axles, with development paced to align with the electrification trend in the bus segment.

Product Mix Challenges and Market Share

While overall MHCV production grew by 3% in Q2, Automotive Axles' revenue declined due to a product mix shift, particularly a reduction in tipper sales during the monsoon season and a higher proportion of 4x2 tractors (which use fewer axles per vehicle than 8x2 models). Management emphasized that the company has not lost market share with its key OEMs, maintaining 60-70% with Ashok Leyland and high double-digit shares with Mahindra and Daimler.

Outlook and Guidance

The company anticipates Q3 and Q4 FY26 to be "very strongly, probably better than last year," driven by robust domestic consumption and the expected positive impact of GST 2.0. For the next fiscal year (FY27), initial volume forecasts suggest a 5-7% decline, though this could potentially be mitigated to a 2-3% decline depending on the final impact of GST sentiment. Management reiterated its commitment to achieving mid-teen EBITDA margins, stating they are "absolutely on track" and expect fixed cost leverage to improve margins as volumes pick up.

Fleet Utilization and DFC Impact

Current fleet utilization stands at approximately 75% for good, efficient fleets, benefiting from improved infrastructure and a shift away from overloading practices. The full impact of GST reduction on fleet operators is still evolving and is expected to become clearer in the next 1-2 quarters. The long-term impact of dedicated freight corridors (DFC) combined with improved efficiency and fuel economy is projected to be a 7-8% impact on the industry, which management believes will be offset by natural demand growth, resulting in a "neutral impact" for the company.

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