IGI Logo

Retails continued to remain strong for PVs and tractors for the entire 1Q, including June, and are expected to grow in double digits, while the 2W segment is witnessing a revival in demand momentum, with likely double-digit retail growth in June. Further, MHCV volumes are expected to remain under pressure due to the onset of the monsoon and cautious sentiment following the West Asia conflict. Within PVs, we expect TMPV and MSIL to post strong double-digit growth and outperform the market, while HMIL is expected to post mid-single-digit growth. Overall, we expect the four listed PV OEMs to deliver an aggregate 21.5% wholesale growth in June’26. In 2Ws, we expect the four listed OEMs to report a 19% volume growth in June’26, largely led by strong retail performance in June and strong exports. From high optimism seen in 4Q, sentiment has now turned cautious in CVs given the West Asia conflict. Overall, we expect the top three CV OEMs to post ~9% aggregate volume growth for the month. In addition, tractors continue to witness healthy demand in the month. Accordingly, we expect the top two tractor OEMs to post about 18% YoY growth in wholesales for June. Overall, easing tensions in West Asia has led to a muchimproved earnings outlook for the sector as crude prices have sharply corrected along with raw material prices. Our top OEM picks are MSIL, TVSL, and MM. Among auto ancillaries, our top picks are MSWIL, SAMIL, and Endurance.

* PVs: Demand continues to remain healthy for June, with retail likely to grow 20% YoY during the month. As such, the channel inventory continues to remain lean for most OEMs. We expect MSIL and TMPV to outperform industry growth in June with strong double-digit growth, given a healthy order backlog. On the other hand, HMIL is likely to witness single-digit volume growth in June. We understand MM continues to face some supply challenges, which are likely to be resolved in a couple of months. For TMPV, the recently launched Sierra and Punch EV are expected to boost wholesales. MSIL’s wholesale volume growth is expected to be supported by a healthy order backlog, low channel inventory, and the ramp-up of incremental capacity at Kharkhoda. For HMIL, wholesale is likely to be muted on account of weak retail and lower exports, driven by higher Middle East exposure. Overall, for June, we expect the four listed PV players to post aggregate growth of 21.5% YoY in dispatches, largely driven by MSIL and TMPV.

* 2Ws: After a tepid retail performance in May, volumes have picked up in June and are expected to record a strong 16% YoY growth. For June, we expect a 19% volume growth in dispatches for the four listed companies, aided by inventory normalization and strong retail. Growth is expected to be led by TVSL and RE. For BJAUT, healthy double-digit volume growth would be largely driven by sustained momentum in exports. We expect HMCL to underperform the industry with single-digit volume growth, as demand for up to 125cc motorcycles continues to underperform the premium industry demand.

* CVs: Retail demand has softened considerably for CVs, given the expected headwinds from the West Asia conflict. According to current trends in Vahan, TMCV continues to outperform peers, with healthy double-digit growth. Overall, we expect the top three players in this segment to post ~9% YoY growth in dispatches in June, largely over a low base of last year

* Tractors: This segment continues to witness healthy demand trends even in the current fiscal, led by positive terms of trade for farmers and healthy reservoir levels. Demand momentum is likely to remain healthy in the tractor segment, at least in 1H. Overall, we expect the two listed players in this segment to post a healthy 18% YoY volume growth in June

* Valuation and view: The demand momentum has remained healthy for all segments, barring CVs, in June. Further, easing tensions in West Asia has led to a much-improved earnings outlook for the sector as crude prices have sharply corrected along with raw material prices. Thus, while 1Q is likely to witness cost pressure, it is expected to subside in the coming quarters. Given the sustained demand momentum and cooling input cost pressure, we expect renewed investor interest in the sector over the coming quarters. Our top OEM picks are MSIL, TVSL, and MM. Among auto ancillaries, our top picks are MSWIL, SAMIL, and Endurance

For More Research Reports : Click Here 

For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412