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Auto ancillary stocks under pressure after weak Q1 earnings

Updated : August 14, 2019 01:25 PM IST

Shares of auto ancillary companies such as Bosch, Bharat Forge came under pressure on Wednesday following weak first-quarter earnings.

Bosch’s numbers were weak and the management said that the slowdown is not cyclical, in fact, it is structural in nature. They expect the slowdown to continue in FY20.

On the inventory levels, Soumitra Bhattacharya, MD of Bosch India said, “There are still high levels of inventory that OEMs are carrying, both at the HCV level and at the LCV level, and also at the three-wheeler level. The companies including in Bosch Limited, we have taken a very clear decision, we will restructure, we will redeploy, and we will reskill people because there are excess capacities unutilized. Besides protecting our crore of the power train, we are also working on electrification and mobility solutions.”

Bharat Forge, which is down 32 percent in 2019, too reported weak numbers. The margins were down 240 basis points year-on-year and shipment tonnage declined 9 percent year-on-year.

Amit Kalyani, Deputy MD at Bharat Forge, said, “If you talk to any of our domestic customers, whether they are in the passenger car sector or in the commercial vehicle sector, two-wheeler sector, they are all needing some kind of a boost coming from liquidity and demand. So the two-wheelers and passenger car sector need liquidity boost and the CV sector customers need a demand boost.”
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