Auto Sector Update - May 2021 preview: Temporary sales hit expected due to lockdowns By Emkay Global
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May’21 preview: Temporary sales hit expected due to lockdowns
May’21 volumes are likely to be hit by the second Covid-19 wave and lockdowns across states. As volumes are not comparable yoy due to the low base last year, we have weighed them against May’19 numbers – double-digit decline is expected across segments. Tractors/PVs should see a lower decline in comparison with 2Ws/ CVs. Nonetheless, we expect a swift recovery in volumes from Q2FY22 due to easing of lockdowns and pent-up demand. 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: Rs410), AL (TP: Rs155), MSIL (TP: Rs8,500) and EIM (TP: Rs3,180). In Ancillaries, we like BHFC (TP: Rs760) and APTY (TP: Rs290). States with complete lockdowns represent 50-60% of volumes across segments. In addition, there are partial lockdowns in the remaining states.
* Agricultural field activities have not witnessed any obstruction/ problems due to the second wave. However, despite being considered as an essential category, Tractor volumes should be subdued on account of the severe impact of the pandemic in rural areas. Twoyear CAGR for domestic volume is likely to be -21% for ESC and -23% for MM.
* PV industry volumes are expected to be in the slow lane, despite healthy order-book across most OEMs. Two-year CAGR for domestic volume is estimated to be -4% for TTMT, -31% for MM and -49% for MSIL.
* 2W industry volumes should be weak. Two-year CAGR for domestic volume is expected to be -43% for EIM-RE, -51% for BJAUT, -54% for TVSL and -58% for HMCL.
* CV industry volumes should be under pressure due to lower freight availability, resulting in the postponement of purchase orders by transporters. Two-year CAGR for domestic volumes is likely to be -55% for MM, -59% for AL, -60% for EIM-VECV and -61% for TTMT.
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