Jun’20 volume review: Multiple factors aiding sequential improvement
* Jun’20 wholesales improved notably on a sequential basis, supported by pent-up demand, better rural sentiments, ramp-up in on-ground sales activities and improved dispatches due to higher plant utilization levels. Retails were higher than wholesales in Tractors, 2Ws and PVs. However, volumes were lower than the last year across segments, baring Tractors.
* Domestic Tractor volumes registered double-digit growth in Jun’20, owing to a partial recovery of lost volumes in March/April and positive customer sentiment. Our checks indicate positive growth across states, baring Odisha, Bihar, Karnataka, Andhra Pradesh and Chhattisgarh. ESC registered 23% yoy growth and MM posted 12% in domestic tractors. ESC has gained market share in Q1FY21.
* Domestic 2W volumes witnessed significant sequential improvement. The marriage season in states such as Uttar Pradesh, Rajasthan and Bihar has also supported volumes. Retails were better than wholesales. However, volumes fell on a yoy basis. Domestic volumes have declined by 26% yoy for BJAUT, 28% for HMCL, 34% for EIM-RE and 36% for TVSL. EIM-RE and HMCL have gained share in Q1FY21.
* Domestic PV industry volumes improved mom but were lower yoy. Jun’20 volumes fell yoy by 54% for MSIL and 58% for MM in the domestic market. For Q1FY21, TTMT has registered a fall of 61%, but gained share. Customer sentiment is improving in rural and government employee segments. But demand from private-sector employees and the business community is expected to recover gradually in subsequent quarters.
* CV volumes remained in slow lane due to surplus capacity with transporters. Jun’20 volumes declined in the domestic market by 75% for EIM-VECV and 82% for AL. For Q1FY21, TTMT has registered a fall of 90%.
* We expect volumes to improve in the coming quarters led by pent-up demand, better rural sentiments and gradual improvement in economic activity. Among OEMs, our top picks are Escorts (ESC IN, TP Rs1,103), Eicher Motors (EIM IN, TP Rs19,954), Mahindra & Mahindra (MM IN, TP: Rs572) and Ashok Leyland (AL IN, TP Rs74).
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