Published on 29/09/2022 3:52:03 PM | Source: Emkay Global Financial Services Ltd

Sector Update Automobiles: September 2022 auto sales Early start of festive season to aid volume performance By Emkay Global Financial Services

Posted in Broking Firm Views - Sector Report| #Auto Sector #Emkay Global Financial Services Ltd. #Sector Report

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Mumbai : Emkay Global Financial Services conducted a channel check to gauge the volumes’ estimate for the month of September. The channel checks indicate a positive volume trend aided by early commencement of Navratri festival in September in comparison with October last year. Tractor and 2-Wheelers’ OEMs should post positive growth on continuing inventory build-up with dealers in the run-up to the festive season. Further, PV volumes should be higher, driven by large order book, new products, and ramp-up in production. In addition, CVs are likely to maintain their positive growth momentum. Emkay Global Financial Services retains their positive view on the auto sector, with Maruti Suzuki, M&M, Tata Motors, Escorts and Ashok Leyland as their preferred picks.

Commercial Vehicles is expected to maintain their uptrend with robust growth in the passenger and cargo segments. The E-way bill trend indicates better freight availability compared with last year. Emkay Global expects a positive growth at 129% YoY for M&M, 56% for Ashok Leyland, 6% for Tata Motors, and 1% for Eicher Motors-Volvo Eicher Commercial Vehicles in the domestic market.As per the channel checks Ashok Leyland is gaining share in MHCVs, buoyed by aggressive marketing efforts. Robust growth for M&M and Ashok Leyland was also supported by favourable base effect.

Passenger Vehicles should witness robust growth on account of a large order book, production ramp-up, and a favourable base effect. Among OEMs, Emkay Global Financial Services estimate domestic volumes to grow by 144% YoY for M&M, 129% for Maruti Suzuki, and 87% for Tata Motors. The volume tally for M&M and Maruti Suzuki is being supported by commencement of dispatches of new products (Scorpio-N for M&M and Vitara for Maruti Suzuki). Vehicle discounts have increased on MoM basis but remain significantly lower than the elevated levels seen in the past.

2-Wheelers volumes are expected to improve owing to the festive demand (Navratri festival) and inventory build-up with dealers. To support volumes, OEMs such as Hero Moto Corp Ltd have announced discounts to support sales in the festive season. The channel checks indicate that urban demand is better than rural, and scooters are doing well in comparison with motorcycles. Emkay Global Financial Services expect domestic volumes to improve by 121% YoY for Eicher Motor-Royal Enfield, 20% for Bajaj Auto, 2% for TVS Motor, and 1% for Hero Moto Corp Ltd. Eicher Motor-Royal Enfield volumes would be robust due to strong response to its new model, Hunter, given order bookings of >55,000 units.

Tractor volumes are likely to grow on continuing inventory build-up with dealers in run-up to the festive period. Emkay Global Financial Services expect growth of 12% YoY for Escorts and 8% for M&M in domestic volumes. Customer sentiments are slightly subdued due to uneven spread of monsoons and lower Kharif sowing acreage. Geographical spread of monsoons continues to be a concern for states such as UP, Bihar, and Jharkhand. As per the latest update, Kharif sowing is 2% below last year’s, with 5% lower rice sowing


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