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Dec’20 preview: Double-digit growth in wholesales to continue

* Wholesales growth should be in double digits for Tractors, 2Ws and PVs in Dec’20. In 2Ws and PVs, there is favorable base effect due to BS4 inventory de-stocking last year. Our channel checks indicate retails are better yoy in Tractors, while it is lower in PVs and 2Ws.

* Tractor wholesales should be robust due to healthy retails and channel filling. Dealer checks indicate an increase in inventory levels by up to 1 week. ESC’s domestic volumes should grow 21%, while MM should see 19% growth.

* Domestic 2W volumes should grow yoy: TVSL by 21%, EIM-RE by 16%, BJAUT by 13% and HMCL by 10%. Dealer inventory levels stand at 4-6 weeks for mass-market OEMs, while it stands at below 1 week for EIM-RE. Dispatches to overseas markets have been impacted by 10-15%, owing to logistics issues (shortage of containers).

* PV industry volumes are likely to grow by 12% yoy. Domestic volumes should grow 60% for TTMT, 7% for MSIL and 6% for MM. Retails are likely to be notably higher than wholesales due to inventory clearing. Discounts have reduced yoy - by ~2% of vehicle prices. Dealer inventory levels stands at 1-2 weeks.

* Domestic CV industry volumes remain muted. Domestic CV volumes are expected to grow 7% for MM, while decline by 1% for AL, 2% for EIM, 6% for TTMT. Dealer inventory levels stand at 2-3 weeks.

* The Automobile sector remains a key beneficiary of economic recovery and low interest rates. In the CV space, we like AL (TP: Rs124) and BHFC (TP: Rs601). Within PVs and 2Ws, our top picks are MSIL (TP: Rs8,216), HMCL (TP: Rs3,839) and EIM (TP: Rs3,025).

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