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Encouraging start to the festive season

While Sep’25 wholesales saw mixed trends, especially in PVs, and were largely limited by logistics constraints, retail sales picked up well across segments. PV wholesales for the four listed players grew 11% YoY, led by TTMT with strong 47% YoY growth. While MM (+10%) and MSIL (+3%) saw relatively weaker wholesales, their retails were robust. In 2Ws, the 4 listed players posted 11% YoY growth, largely led by RE (+43%) and TVS (+12%). While BJAUT (+9%) and HMCL (+8%) saw relatively slower YoY growth, both posted 20%+ MoM recovery in wholesales. The top three CVs registered ~13% YoY growth, led largely by TTMT with 19% YoY growth. Tractor segment witnessed strong demand, with both listed players posting close to 50% YoY growth in volumes, along with a positive outlook ahead. Overall, sector momentum has turned positive after GST rate cuts. Our top OEM picks are MSIL and MM.

* PVs (mixed): Customer footfalls, bookings, enquiries and deliveries have surged after the GST rate cuts. However, as we noted earlier, PV wholesales would largely be a function of how OEMs manage logistics better in the last week, and it seems that TTMT has managed its logistics better than others, as it posted robust 47% YoY growth in Sep’25 sales, hitting its record high of 61k units, driven by exports and EV sales. MSIL posted ~3% growth YoY to 190k units, with major contributions from exports (+52% YoY) and compact segment (+13% YoY). While MSIL wholesales have not seen the full potential, one needs to note that: 1) overall customer bookings have increased 35% YoY in the first nine days of the festive season, with small car bookings rising 50%; 2) MSIL posted 165k units of retails in the first nine days of the season and is on track to cross 200k deliveries in the entire Navratri festival compared to 85k units last year. Hyundai volumes remained in line with our estimates at 70k units, growing ~10% YoY, mainly driven by 44% YoY growth in exports even as domestic volumes remained flat YoY. For MM, UVs grew 10% YoY to 56k units, ahead of our estimates. While MM wholesales were limited by logistics constraints, its retails saw robust 60% growth on YoY basis in the first nine days of the festive season. Overall, PV wholesale volumes grew 11.4% YoY for the four listed players in Sep’25 and 2.6% YoY on YTD basis.

* 2Ws (mixed): The four listed players posted 11% YoY growth in Sep’25, largely led by TVS and RE. BJAUT sales grew 9% YoY to 510k units (in line). While domestic motorcycle volume seems to have increased just 5% YoY, it was actually up 48% MoM, highlighting the uptick in festive momentum. BJAUT’s export momentum continued to be strong (18% YoY and 20% YTD). TVSL maintained healthy growth momentum and posted 12% YoY growth in total vehicle sales to 541k units (however below estimate of 572k units). While 2W sales grew 11% YoY, 3W posted strong 60% growth YoY. HMCL’s Sep’25 sales rose 8% YoY to 687k units (in line). RE posted a record festive season performance, with volumes growing 43% YoY to 124k units, broadly in line with our estimates. Overall, 2W volumes for the four listed entities have grown 8% YoY YTD, largely driven by exports.

* CVs (mixed): The three listed players posted ~13% YoY growth in CV sales in Sep’25, driven by TTMT. TTMT posted a strong recovery in the CV segment (ahead of our estimate), with volumes growing ~19% YoY to 35,862 units. SCV (+30%) and exports (+94%) were the key growth drivers. Ashok Leyland sales remained in line with estimates, with volumes up 9.2% YoY. While MHCVs grew 7% to 11,808 units, LCVs grew 14% to 7,005 units. VECV dispatches were below estimates, remaining flat YoY at 7,619 units. Overall, for YTDFY26, CV sales for the three listed players have increased by 3.8% YoY, with a positive outlook for 2H, supported by construction, infrastructure and mining activity.

* Tractors (above): The tractor segment posted robust sales growth of 49% YoY for the two listed players, significantly outperforming our estimates. For MM, tractor volume rose 49% YoY to 66k units (above est. of 49k units). Escorts also posted 48.5% growth in domestic volumes and 17.5% growth in exports. Growth was driven by positive rural sentiment and supported by GST cuts on both tractors and parts. With such positive sentiment, there is a clear upside risk to our current tractor growth estimate of 10% for FY26E.

* Valuation and view: Sep’25 retails were expected to be strong across segments on the back of GST rate cuts and pent-up demand. The notable trend is that entry-level vehicles, both 2Ws and PVs, are seeing a marked pickup in demand. Most OEMs across segments expect to sustain the healthy momentum at least till Diwali, if not beyond. With a recovery in demand, we expect discounts to gradually reduce after the festive season. MSIL is our top pick among auto OEMs, as its new launches and the current export momentum should drive healthy earnings growth. We also like MM given the uptrend in tractors and healthy growth in UVs.

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