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Festive timing mismatch to dent retails (ex 2W)

Key Pointers for Mar’24:

* 2Ws - Gudi Padwa festive retails expected to grow in key markets.  

* PVs – No substantial change in demand trends vs prior months; average discounts rise across segments MoM.  

* CVs – Double digit retail drop expected YoY led by high base due to OBD2; tonnage shift stays favorable.  

* Tractors – Festive timing mismatch aggravates inherent weakness. 

Our interaction with channel partners hints at weak retail demand for Mar’24 YoY: Low to mid-single digit growth for 2Ws, while high single to double digit decline for PV, CV and tractors. The base is not comparable given the festive timing mismatch for Gudi Padwa (key for MH and GJ) and Chatri Navratri (key for MP, RJ and north states). Having said that, within 2Ws, semi-urban/rural growth continue to beat urban growth, upcoming festive growth likely to be moderately positive. In EV 2Ws, TVS is offering flat discounts of Rs6k/unit and discounted warranty schemes in response to recent price cuts by peers. In PVs, current demand trends mirror prior month patterns, and the persisting weakness will cause a spike in average discounts by 10-30% MoM and near to peak discounts in a few segments. CV segment inventory is likely to stabilize at ~23-25 days, partly led by inventory restocking ahead of price hike expected in Apr’24 while tonnage shift stays favorable. Discounts increased MoM by 2-3% (vs price hike of 1-1.5% in Feb’24), ensuring continued healthy net pricing.

Key wholesale expectations – MSIL at ~205k (-21% YoY/ +4% MoM), AL at ~24.2k (+1.1% YoY/ +38.6% MoM), Royal Enfield at 78.5k (+8.7% YoY/ +3.4% MoM).

Top Picks - TTMT (BUY), TVS (ADD), BJUAT (ADD) among OEMs and EXID (BUY), MOTHERSO (BUY) and ENDU (ADD) among ancillaries.

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