Published on 4/11/2019 11:06:59 AM | Source: Reliance Securities Ltd

Auto Sector - Strong Festival Sales across Segments By Reliance Securities

Posted in Broking Firm Views - Sector Report| #Auto Sector #Sector Report #Reliance Securities Ltd

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Strong Festival Sales across Segments...

Indian auto companies delivered a strong volume performance across segments in Oct’19 on the back of festival purchases and pent-up demand of past 8-10 months. Retail sales of most segments reported decent YoY growth during the festival, while inventory correction pertaining to phasing out of BS-IV vehicles led to lower wholesale dispatches. Most players witnessed record-high monthly volume at retail level. While 2W segment continued to record higher double-digit volume decline, CVs recorded a sharp ~40% YoY decline during the month. Surprisingly, tractor segment reported flat YoY volume performance on a high base. Inventory decrease by ~1-2 weeks by most auto players is a usual phenomenon post festive season. Moreover, higher inventory correction was aimed as a preparation for BS-VI transition. Overall inventory level of most auto segments is <1 month now. We believe that the industry would see sequential improvement in 2HFY20, though on YoY basis its performance would remain muted in FY20. There has been sizable improvement in footfalls in past few days, while decent conversion of enquiry into sales was witnessed during festivals. Higher retail performance was supported by festive demand, record-high discounts and pent-up demand of previous 8-10 months. Therefore, industry performance in Nov-Dec’19 would be very crucial to judge the demand sustainability.

In 2W segment, Bajaj Auto’s sales declined by 9% YoY (+15% MoM) to 4,63,208 units. Hero MotoCorp’s sales fell by 18% YoY (-2% MoM) to 5,99,248 units, while TVS Motor’s sales declined by 19% YoY (+2% MoM) to 3,23,368 units. Amongst four-wheeler players, M&M’s auto volume fell by 11% YoY (+20% MoM) to 51,896 units, while Maruti Suzuki’s volume grew by 5% YoY and (+25% MoM) to 1,53,435 vehicles. Ashok Leyland’s volume declined by 35% YoY (+12% MoM) to 9,857 units, while Tata Motors’ volume declined by 34% YoY (+14% MoM) to 41,354 units. In tractor segment, M&M’s tractor volume declined by 4% YoY (+23% MoM) to 45,433 units, while Escorts’ volume increased by 2% YoY and 23% MoM to 13,353 units due to seasonality.


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