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May’19 volume preview: Weak show expected across segments
* Weak performance expected across segments due to the high base effect, purchase deferrals during elections, increasing cost of vehicle ownership, dealer inventory corrections, and financing issues.
* MHCV volumes are likely to remain in the slow lane with a decline of 4-8% in the domestic market for OEMs such as TTMT, AL and EIM-VECV. Volumes should be lower yoy due to surplus capacity with fleet operators, high base, and purchase deferrals during elections.
* 2Ws a mixed bag: Volume decline is expected in the domestic market for EIM-RE (-15%), HMCL (-15%), while growth is expected for BJAUT (6%) and TVSL (3%). Consumer sentiment remains weak, mainly due to the rising cost of ownership.
* Subdued PV numbers: Volume decline is expected in the domestic market for MSIL (-17%), TTMT (-14%) and MM (-6%). MM's fall is relatively lower due to new products, while MSIL's performance is expected to be affected by lower sales of Dzire, Swift, Celerio, Brezza and Omni models.
* Tractor volumes in the domestic market to decline 8% for MM and 11% for ESC, mainly due to the high base effect and weak consumer sentiment.
* PVs remain a preferred space: Within the auto space, we prefer PV companies that are relatively less affected by the upcoming BS6 transition. In contrast, we are negative on the MHCV and 2W segments due to the high base effect and rising cost of ownership.
* Our top picks in the sector include: Mahindra & Mahindra (TP: Rs800), Exide Industries (TP: Rs267), and Motherson Sumi (TP: Rs144). Our top Sell-rated names are Ashok Leyland (TP: Rs71), Eicher Motors (TP: Rs17,200), and Bajaj Auto (TP: Rs2,500).
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