Aug’20 volume review: Robust growth in Tractors and PVs
* Robust growth continued in Tractors at over 60%. Growth in PVs turned positive yoy with double-digit growth (~20%), aided by early festive period and improved dispatches driven by higher plant utilization levels. Volumes were flat yoy in 2Ws.
* Driven by positive rural sentiment and channel filling, Tractor wholesales were robust, with ESC registering growth of 79%, and MM positing 69% in the domestic market. As per our checks, states with strong growth were Andhra Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Gujarat, Tamil Nadu, Rajasthan, Haryana and Punjab, while states with muted performance were West Bengal and Bihar.
* Domestic PV industry volumes have been robust (~20%), helped by positive growth for OEMs such as MSIL, TTMT, Hyundai, Renault, Kia Motors and MG Motors. Among listed companies, domestic volumes grew yoy, by 20% for MSIL and 1% for MM.
* Domestic 2W industry wholesales were flat yoy, supported by festive demand and higher production levels. Domestic volumes increased yoy - by 9% for HMCL and 3% for BJAUT, while there was a marginal decline of 1% for TVSL and 2% for EIM-RE. Despite strong order bookings (over 60,000 units in Aug’20), EIM-RE witnessed a volume decline due to the slow ramp-up in utilization levels at its plants.
* Domestic CV industry volumes remained in the slow lane due to surplus capacity with fleet operators. The fall was higher in MHCVs than in LCVs. Domestic CV volumes declined yoy by 30% each for AL/EIM-VECV, while it slightly improved by 4% for MM.
* We expect volumes to improve in the coming quarters on pent-up demand, better rural sentiment, low interest rates, improvement in finance availability, and a gradual pick-up in business/economic activity. Our top picks are Eicher Motors, Mahindra & Mahindra and Ashok Leyland
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