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Oct’21 review: Uptrend persists in CVs; better chip supplies to aid PV volumes ahead

* In Oct’21, domestic CV volumes witnessed robust growth, aided by better freight availability/rates. Other segments were subdued due to factors such as supply issues, muted rural sentiments and a high base due to inventory filling last year. Improving chip supply is expected to aid sequential improvement in volumes for PVs and premium motorcycles ahead. We retain a positive view on the auto sector, underpinned by expectations of a cyclical upturn in the next three years. We like ancillaries such as MSS (TP: Rs300), APTY (TP: Rs290), BHFC (TP: Rs920) and RMKF (TP: Rs1,530). Among OEMs, we like MSIL (TP: Rs8,750), EIM (TP: Rs3,040), TTMT (TP: Rs550) and TVSL (Rs800).

* CV volumes improved in Oct’21, aided by improving freight availability (~2.3mn E-way bills generated per day, which is near peak levels) and better freight rates (refer to Exhibit 7/8). Among OEMs, domestic yoy volume growth stood at 27% for EIM, 20% for TTMT and 13% for AL. In comparison, MM witnessed a 27% fall owing to chip shortages.

* Domestic 2W volumes declined notably due to lower retails and a high base last year on account of inventory filling. In addition, chip shortages affected dispatches for premium motorcycles. Among OEMs, domestic volumes declined yoy by 35% for EIM-RE, 33% for HMCL, 26% for BJAUT and 14% for TVSL.

* Domestic PV industry volumes fell 22% yoy but grew 40% mom to ~260,000 units. Domestic volumes declined 34% yoy for MSIL, whereas they grew by 43% for TTMT and by 8% for MM. Chip supplies are expected to improve in a staggered manner in coming months.

* Domestic Tractor volumes were muted. Volumes declined by 0.4% yoy for MM and 3% for ESC due to a high base.

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