IGI Logo

1st festival to start positively for autos, post Covid

encouraging retails during Ganesh Chaturthi and Navratras

* Our interactions with leading industry channel partners indicate a brewing positive sentiment for the upcoming festive season, starting with the Navratras from 26th Sep’22. The market can expect some pent-up demand during this season.

* The 2W segment, which has remained sluggish for a while, is expected to see a good uptick this festive season. While PV demand remains strong, supplies are improving sequentially. CV demand remains good and demand for tractors is expected to improve. Retail sales during the Ganesh festival saw good YoY growth in both the 2W and PVs segments. Sep-22 also had the 15 days of inauspicious period of Shraddh (split over Sep-Oct’21).

* In Sep’22, wholesale volumes are estimated to grow by 8%/108%/18%/16%/flat YoY for 2Ws/PV/3W/CV/tractors.

* 2Ws: Inquiries and bookings have picked up in the month of Sep’22. OEMs are announcing attractive offers for Navratras. Quite a few OEMs have planned some product refreshes for this festive season.. HMCL took a price hike of up to INR1k in Sep-22. The supply chain issues in the Entry/Executive level portfolio for HMCL has started to ease out. RE Hunter has been able to attract some new customers, while the other models remain fairly stable. Inventory for the festival season is around 50-60 days. We expect wholesales for BJAUT 2Ws to grow ~4% YoY (domestic 2Ws growth of 40% YoY), TVS 2W to grow ~5% YoY (domestic 2W growth of 10%), HMCL to grow 5% YoY and RE to grow ~120% YoY (Sep-21 RE was hit by chip shortages).

* PVs: Improving chip supplies coupled with stable demand would aid PV wholesales. The waiting period for PV have reduced significantly; however, it still remains high for certain models such as newly launched Scorpio N, XUV700, and Ertiga CNG. There has been a 10-15% impact on the CNG vehicle bookings owing to the rise in CNG prices. Therefore, TTMT’s and MSIL’s CNG vehicles (Celerio/WagonR) are readily available for consumers. Inventory in the system is around 30 days. Volumes are expected to grow 104%/130%/91% YoY for MSIL/ MM (UVs incl.pickups)/ TTMT PVs.

* CVs: Demand has been improving post monsoons, but OEMs are still offering discounts to gain market share. Inventory in the channel is at its optimal level of 20-30 days. We expect AL’s CV wholesales to grow 61.5% YoY (85% YoY growth in M&HCV and 35% growth in LCV); TTMT CVs to grow 8% YoY (10% YoY growth for M&HCV and 7% growth for LCVs) and VECV to decline 7% YoY.

* Tractors: Inquiries have been encouraging in Sep-22, primarily led by discounts offered by OEMs. ESC is offering aggressive consumer offer to regain lost market share. Excess rainfall in some states is expected to have an effect on the Kharif harvesting. Commercial demand might remain low. Inventory in the system is around 30-45 days, considering the festival season. Tractor volumes are expected to remain flat for MM and grow 4% YoY for ESC.

* 3W: We expect 3W volumes to grow 18% YoY, aided by 11%/68%/25% YoY growth in BJAUTO/MM/TVS. Export volumes for BJAUTO /TVS are expected to remain under stress.

* Valuation and view: While easing semiconductor supplies boost PV retails, CV demand momentum is quite stable. The 2W segment demand hinges on the festive season, which seems to have started on an encouraging note. We prefer 4Ws over 2Ws, on the back of strong demand and offer a stable competitive environment. We expect CV cycle to maintain its momentum. We prefer companies with: a) higher visibility in terms of demand recovery, b) a strong competitive positioning, c) encouraging margin drivers, and d) a strong balance sheet. MSIL and AL are our top OEM picks. Among auto component stocks, we prefer BHFC and APTY. We also like HMCL as a pure play on the domestic 2W recovery.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://www.sushilfinance.com/Disclamier/disclaimer
Member : BSE/ NSE/ MSEI. SEBI Registration No.-INZ000165135.
 

Above views are of the author and not of the website kindly read disclaimer