Published on 4/04/2019 10:56:58 AM | Source: ICICI Securities Ltd

Auto Sector - FY19 ends on a weak note By ICICI Securities

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FY19 ends on a weak note

Two-wheeler (2W): Modest demand and high inventories lead to production cuts

* Hero Motocorp (Hero) reported a sharp decline of 20% YoY to ~581k units in Mar’19 while it closed FY19 with 3% growth at 7.8mn units. The decline in dispatches is likely on the back of production rationalisation undertaken to balance dealer inventories. We expect Hero to scale down dealer inventory to normalised levels of 4-6 weeks by Q1FY20. Demand pickup related to the festive season (Gudi Padwa in West, Marriage season in North) remains key monitorable for Q1FY20.

* TVS Motors (TVSM) reported a flat month in terms of YoY growth at ~325k units. Domestic sales declined 7% YoY to ~249k units while exports clocked 28% YoY growth to ~76k units. On the segmental level, motorcycle volumes grew fastest at 5% to ~141k units, moped volumes declined 11% YoY ~71k units and scooter declined 2% YoY to ~99k units. The 3-wheeler segment grew 33% YoY to ~14k units. As per our channel checks, TVSM continues to enjoy the lowest dealer inventory levels amongst its 2W peers

* RE reported 20% YoY decline to ~61k units; >350cc motorcycle volumes declined 11% YoY to ~5.9k units. Exports grew 28% YoY to ~2.4k units aided by volume ramp-up for the newly launched 650cc twins.

* Bajaj Auto (BAL) is yet to report numbers.

* Honda Motorcycles and Scooters India (HMSI) is yet to report numbers.


Passenger vehicles (PVs): Demand remains sluggish

* Maruti Suzuki (Maruti) volumes were down 2% YoY to ~158k units with the minivehicle segment declining 55% YoY to ~17k units while the compact segment grew 20% YoY to ~83k units (true comparison is hampered due to reclassification of the new Wagon-R segment from mini to compact). Ciaz decline continued 15% YoY to ~3.6k units. The UV segment grew 13% YoY to ~26k units aided by the refreshed Ertiga launch. PV segment growth continues to be driven by vans (largely commercial usage) which grew fastest at 20% YoY to ~16k units. Exports remained weak with a 13% YoY decline to ~10.5k units.

* Hyundai overall volumes were up 1% YoY to ~61k units aided by export growth of 34% at ~17k units.

* Tata Motors domestic PV volumes declined 12% YoY to ~18k units. We estimate a 30% YoY decline to ~8.8k units in PC sales and 16% YoY growth to ~9k units in UVs.

* Toyota reported an overall sales volume growth of ~1% to ~13.6k units while domestic volumes grew 2% YoY to ~12.8k units.

* Honda Cars overall volumes grew 23% YoY to ~17.2k units, largely driven by domestic growth (27% YoY) on the back of new products, e.g. Amaze.


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