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Tractor demand steady, other segments remain weak

Overall demand across key segments remained weak in Apr’25. For OEMs reported so far, MM, TVSL and VECV outperformed our estimates. On the other hand, Hyundai, TTMT CV, HMCL and Escorts posted sales below our estimates. In PVs, MM outperformed peers with a strong 28% YoY growth in volumes. Even MSIL started FY26 with a steady 7% YoY growth. However, Hyundai and TTMT PV underperformed peers, with volumes down 5% each. For 2Ws, TVSL posted strong all-round performance (2Ws +18%, exports +45% and 3Ws + 50%). On the other hand, HMCL posted 43% YoY decline in wholesales, largely impacted by the plant shutdown it took in April. In CVs, VECV outperformed its larger peer TTMT. Tractor sales momentum slowed down in Apr’25 due to preponement of festival in Mar’25. However, MM continued to outperform Escorts. Tractor momentum is likely to remain healthy given favorable demand indicators. Our top OEM picks remain MSIL and MM.

* PVs (in line): PV wholesales grew 7% YoY, in line with expectations. Among listed peers, MM outperformed peers. MM’s UV volumes rose 28% YoY (ahead of estimates), driven by strong momentum in its SUV lineup, including its recently launched EVs. Led by strong growth in UVs, its auto segment sales grew 19% YoY. MSIL has begun FY26 on a steady note with 7% YoY growth in volumes to 180k units (in line). Growth was driven by compact sales (+14% YoY) and exports (+26% YoY). On the other hand, both Hyundai and TTMT continued to underperform. While Hyundai volumes were down 5% YoY (domestic sales down 12%), TTM PV sales were down 5% YoY.

* 2Ws (mixed; BJAUT): TVSL continued to post strong growth – with 2Ws growing 15% YoY to 430k units (vs. est. of 390k). In 2Ws, scooters grew 18% YoY for TVSL. Even motorcycles were up 17% YoY, but largely led by exports. TVSL posted a robust 46% YoY in 2W exports. Even 3W sales were up 45% YoY. On the other hand, HMCL wholesales were down 43% YoY at 305k units (below est of 390k). HMCL’s wholesales has been impacted by the plant shutdown the company announced in four of its key plants between Apr17-19 due to supply chain issues. Management has clarified that its retails have been strong at 505k units in April. Royal Enfield growth slowed down to about 6% YoY to 86.5k units (in line). RE growth was largely driven by exports, which grew 55% YoY to 10.5k units.

* CVs (mixed; AL yet to report): Within CVs, VECV continued to outperform its larger peer TTMT. VECV posted a robust 27% YoY growth in CV sales to 6.8k units (est. 6.1k units). On the other hand, TTMT CV sales were down 8% YoY at 27k units (below our est of 30k units).

* Tractors (in line): Dispatches for tractors were largely in line with our estimates. MM posted 8% YoY growth to 40k units. However, Escorts continued to underperform and posted 1% YoY decline in volume to 8.7k units (below estimate of 9.8k units). Overall, tractor growth momentum slowed in Apr’25 due to the festive preponement in Mar’25. Given positive indicators, including good rabi harvest, higher crop prices and sufficient reservoir levels, Escorts anticipates a pick-up in demand momentum in coming months.

* Valuation and view: While overall demand remained weak in Apr’25, select players like MM, TVSL and VECV continued to outperform their respective segments. MSIL is our top pick among auto OEMs as its upcoming new launches are expected to continue to improve the mix and drive healthy earnings growth. We like MM given the uptrend in tractors and healthy growth in UVs. Among ancillaries, we prefer ENDU and HAPPYFORG

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