Auto Sector Update - December’ 2021 volume preview: CVs to maintain positive growth, other segments to see decline By Emkay Global
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December’21 volume preview: CVs to maintain positive growth, other segments to see decline
Our channel checks indicate that CVs should maintain positive momentum in Dec’21. PV volumes are likely to be hit by the chip shortages, though volumes should be better MoM. 2Ws and Tractors are likely to decline due to the moderation in rural demand and the high base effect. In addition, concerns about the new Covid variant have delayed the reopening of educational institutions and offices, impacting demand. We retain a positive view on the auto sector, underpinned by expectations of a cyclical upturn in the next three years. We like TTMT (TP: Rs550), AL (TP: Rs160), MSIL (TP: Rs8,750) and TVSL (TP: Rs800). In ancillaries, we like MSS (TP: Rs300) and BHFC (TP: Rs950).
* CV industry volumes are likely to improve, aided by strong demand for ICVs/Tippers and a pickup in replacement demand for MAVs. We expect domestic volumes to grow by 11% yoy for MM, 8% for EIM-VECV and 5% for TTMT. In comparison, we expect a 20% fall for AL. The launch of CNG variants should support volumes ahead for AL.
* 2W industry volumes are expected to be lower compared to last year due to the moderation in rural demand and the high base effect. As per our channel checks, demand during the marriage season has been muted. The chip shortage has affected dispatches of premium motorcycles. We expect domestic volumes to fall by 15% yoy for EIM-RE, 13% for HMCL and 7% for TVSL, while BJAUT should see a slight growth (+5%). Led by a healthy order book and pickup in chip supplies, EIM-RE may see a 24% improvement MoM.
* PV industry volumes may fall due to supply-related challenges, though volumes are likely to be better on a sequential basis. We estimate domestic volumes to grow by 30% yoy for TTMT and 24% for MM, while we expect an 18% drop for MSIL. Production is expected to further improve ahead with better chip supplies. Discounts remain low in comparison to the previous year, considering the robust order book.
* Tractor volumes are likely to see a decline due to the high base from last year. We expect domestic volumes to fall by 10% for MM and 17% for ESC.
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