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Expect YoY growth across segments along with recovery in 2W sales

* Our interactions with leading channel partners indicate a healthy start to the festive season, especially in the 2W category. 2W volumes are expected to grow by 12-14% YoY in Sep’23. While overall growth has largely been supported by festive demand and aggressive financing, rural demand has not yet picked up, and hence sustenance of demand momentum after the festive season should be a key to watch out for. CV retails are expected to grow 4-6% YoY in Sep’23 as freight demand has improved post the lean months of monsoon and ahead of the festive season. In PVs, execution of the order book and stable demand for high-end models should help volumes, and hence we expect 8-10% YoY growth in Sep’23. However, increasing discounts, especially in the low-end segments, and a decline in the waiting period indicate gradual softness in demand sentiment. Wholesales are estimated to grow ~9%/4% YoY for PVs/CVs but decline 8% YoY for tractors. 2W volume growth is expected to remain flat YoY.

* 2Ws: Retails are expected to grow 12-14% YoY in Sep’23, led by healthy demand during festivals, aggressive financing by NBFCs and stable growth in urban regions. Demand growth in central and southern states was healthy at 13-15% YoY during Ganesh Chaturthi days, while dealers in northern states are hopeful of strong traction in the upcoming festive season. A few NBFCs have raised their LTVs to 90% vs. ~80% normally, which has further boosted demand sentiment. Enquiries for newly launched and affordable variant of Hero Destini 125 are picking up, with 20-25% customers coming from Activa 125 so far. In case of RE, volumes have started ramping up as the supply chain has largely been restored, resulting in healthy dispatches for the month. For 2Ws, the overall inventory level stands at 45-47 days, while it is the highest for HMCL at 58-60 days. For RE, inventory stands at 10-12 days. We expect dispatches for HMCL/TVSL/RE to grow 3%/1%/8% YoY, while they are expected to decline 7% YoY for BJAUT.

* CVs: MHCV retails are expected to grow 4-6% YoY during the month as freight demand has improved post the lean months of monsoon and ahead of the festive season. On the other hand, LCV growth has moderated and volumes are expected to decline 3-5% YoY. Freight utilization stands at ~75-80% for the oneway route, while return freight utilization is picking up gradually. The month witnessed higher traction from end user industries such as infra, FMCG, auto carriers, etc. Meanwhile, agri-related activities remained subdued. The upcoming festival season and a positive macro outlook should drive healthy growth for MHCVs. The loan-to-value ratio stands at over 95% for large fleet operators and ~90% for smaller fleet operators. There is an anticipation of price hikes of up to 3% from Oct’23 onward by major OEMs. Inventory currently stands at ~4 weeks. We expect dispatches for TTMT CV/AL/VECV to grow 2%/5%/7% YoY.