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Above our estimate; volumes grew 65% YoY to 113.2k units

* Wholesales came in above our estimate at 113.2k units (est. 102.4k units), up 65% YoY.

* Tractor volumes grew 21% YoY to 48.7k units (est. 40.4k units). We have factored in a volume growth of 7% for FY23, implying a residual growth of 1%, or 27.9k units/month.

* UV volumes (inline) grew 137% YoY (on a low base) to 57.9k (est. 56.2k units). Domestic Passenger UV sales grew 163% YoY. The same for Pick-ups and SCVs grew 137.5%. We expect UV volumes to grow by 48% YoY in FY23, with a residual growth rate of 31%, or a monthly run rate of 55.3k units.

* 3W volumes grew 94% YoY to 5.8k units (est. 5k units). We expect 3W volumes to grow by 75% in FY23, with a residual growth rate of 40%, or a monthly run-rate of 4.5k units.

* As per Mr. Veejay Ram Nakra, CEO, Automotive division, MM, “Sep’22 was a very exciting month with a strong start to the festive season. We see very strong demand and performance across our product portfolio: from SUVs, LCVs less than 3.5t, and our lastmile mobility brands. We are delighted that our SUVs have registered record sales of 34,262 units as well as record overall volumes of 64,486 units in Sep’22.”

* Commenting on its performance in Sep’22, Hemant Sikka, President – Farm Equipment Sector, MM, said, “We sold 47,100 Tractors in the domestic market in Sep’22, a growth of 21% over last year. This is our highest ever monthly sales. Demand remained strong in Sep’22 owing to the festive boost. We expect the same to continue in Oct’22 as well. Harvesting of the Kharif crop will begin soon. And with crop prices holding firm, the sentiment is positive. An above normal monsoon has improved reservoir levels, leading to high moisture content in the soil, which is very positive for higher food grain production in the upcoming Rabi season. In the export market, we have sold 1,613 Tractors, a growth of 26% over last year.”

* The stock trades at a core P/E of 13.6x FY24E standalone EPS and 2.1x core P/B. We maintain our Buy rating.

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