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March 2021 volume review: Driving forward

* Wholesales grew sequentially in Mar’21, with double-digit growth in CVs and Tractors and single-digit growth in 2Ws and PVs. As volume numbers are not comparable yoy due to the low base, we have weighed them against Mar’19 numbers – Tractors and PVs were higher, 2Ws were slightly lower and CVs were notably lower than Mar’19 levels.

* CV industry volumes were above estimates across OEMs, supported by a ramp-up in production levels. On a mom basis, domestic volume growth for MM stood at 86%, EIM at 25%, AL at 23% and TTMT at 18%. Sequential improvement in MM was led by a ramp-up in production for Bolero pickup model. Two-year volume CAGR for EIM stood at -9%, AL at -12%, TTMT at -15% and MM at -16%. In terms of market share, EIM and AL reported gains in FY21. At Mar’21-end, dealer inventory stood at 2-3 weeks as per our checks.

* PV industry volumes were also above estimates across OEMs, aided by a healthy orderbook (several models have waiting periods ranging for 1-4 months) and better production. On a mom basis, domestic volume growth stood at 9% each for MM/ TTMT each and 1% for MSIL. Two-year volume CAGR was a mixed bag, with TTMT/ MSIL reporting 29%/2% growth and MM posting a 22% decline. TTMT has witnessed notable market share gains in FY21, driven by new models, network expansion and focused marketing efforts. Dealer inventory stands at 2-3 weeks.

* 2W industry volumes improved sequentially, helped by channel filling before the festive season. Domestic volume growth mom for BJAUT stood at 22%, HMCL at 12% and TVSL at 4%, while EIM-RE witnessed an 8% decline due to some delay in dispatches from plants. Two-year volume CAGR was a mixed bag, with EIM-RE reporting 1% growth, while HMCL/BJAUT/TVSL recording a decline of 1%/9%/10%. In terms of market share, HMCL and TVSL saw gains in FY21. Dealer inventory stands high at 5-7 weeks.

* Tractor industry volumes remained in an uptrend and came in above estimates. On a mom basis, domestic volume growth for MM and ESC stood at 10% each. Two-year volume CAGR stood at 27% for MM due to a low base and 1% for ESC. Both MM and ESC have lost market share in FY21 due to production constraints. Dealer inventory was at 3-4 weeks.

* Our positive view on the Automobile sector is underpinned by expectations of a strong cyclical upturn, which is expected to last at least three years. Our top picks among OEMs are TTMT (TP: Rs375), AL (TP: Rs155), MSIL (TP: Rs9,000) and EIM (TP: Rs3,300). In Ancillaries, we like BHFC (TP: Rs760) and APTY (TP: Rs306). Key downside risks to our calls and estimates: Delay in economic recovery, rising competitive intensity and adverse movement in currency/commodity prices.

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