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Tractor OEMs continue to see strong growth

OEM volumes for PVs, 2Ws and CVs were largely in line with expectations in Mar’25, while tractor volumes outperformed. For OEMsreported so far, Hyundai, RE, MM tractors, AL, TTMT and Escorts exceeded estimates, while other OEMs met expectations. Overall, PV wholesale dispatches for our coverage universe grew ~6% YoY, with MM sustaining its outperformance. In 2Ws, TVS and RE continued to post healthy volume growth. BJAUT and HMCL are yet to report volumes. CV volumes were flat YoY as LCVs fell 10% despite a 7% YoY increase in MHCVs. Tractor demand was a bright spot as volumes surged ~29% YoY, supported by strong farm sentiment, a good rabi crop outlook, and festive demand. We expect tractor demand to remain resilient in the near term. For FY25, MM has outperformed peers in PVs, TVS in 2Ws and VECV in CVs. While Mar’25 dispatches were steady, overall demand still remains weak in mostsegments, as per our dealer checks. Our top OEM picks remain MSIL and MM.

* PVs (in line): PV wholesales grew 6.5% YoY, in line with expectations. Among listed peers, MM emerged as a strong performer. MM’s UV volumes (including PikUp) rose 21.2% YoY, driven by strong momentum in its SUV lineup. Its overall dispatches increased 23% YoY to 83.9k units, slightly below our estimate of 84.4k units. MSIL reported a 3.1% YoY increase in PV volumes to 192.9k units (in line). Its SUV volumes grew by 4.6% YoY, while non-SUV volumes remained largely flat, resulting in a ~1% YoY decline in overall domestic sales. However, exports surged 27.3% YoY. Hyundai’s domestic volumes declined by 2.2% YoY, though a 23% YoY rise in exports led to an overall 3% YoY growth in total volumes to 67.3k units (est. 58.7k units). TTMT’s PV volumes grew 3% YoY to 51.9k units (est. 46.1k units). For FY25, MM outperformed its peers with 20% YoY growth in UV sales. On the other hand, while MSIL domestic PV volumes grew 3% YoY, the same for Hyundai and TTMT declined 3% each.

* 2Ws (In line; BJAUT and HMCL yet to report): TVSL 2W volumes grew 16% YoY to ~400k units (est. 391.9k), as domestic volumes grew 14% YoY and exports grew 23% YoY. For TVSL, motorcycles/scooters grew 15%/29% YoY and 3W volumes grew 44% YoY, while moped declined 16% YoY. RE continued its healthy performance as it reported better-than-expected volumes at ~101k units, up 34% YoY (est. 92.2k), with domestic/exports volume up 33%/36% YoY. For FY25, while TVS total volumes grew 13% YoY, RE volumes grew 11% YoY.

* CVs (in line): Overall CV volumes were largely in line, whereas MHCV volumes came in better than expectations. While MHCV volumes grew ~7% YoY, LCVs declined 10% YoY. TTMT volumes fell 2.7% YoY to 41k units, still surpassing our estimate of 38.9k units. VECV recorded 7.6% YoY growth, delivering 12.1k units (est. 11.8k units). AL posted 6% YoY growth to 24.1k units (est. 22.7k units). In its press release, TTMT expressed confidence in maintaining growth momentum in FY26, despite headwinds. The company expects CV demand to rise, driven by higher fleet utilization, financial support from interest rate cuts, lower crude oil prices, and a renewed push for large-scale infrastructure projects. For FY25, VECV has outperformed its peers with 5% YoY growth in CV volumes. On the other hand, while AL volumes were flat YoY, TTMT CV volumes declined 5% YoY.

* Tractors (above estimate): Dispatches for tractors were better than expected as volumes for both OEMs surpassed our estimates. MM once again outperformed Escorts in tractor sales, posting an impressive 34% YoY growth to 34.9k units, well ahead of our estimate of 29.5k. Escorts recorded a 15% YoY increase to 11.4k units (est. 9.5k). Both companies remain optimistic about the tractor demand outlook. Escorts, in its press release, attributed the strong market demand to the Chaitra Navratri Festival and expects the growth momentum to remain intact in the coming months. Additionally, favorable conditions, including increased rabi sowing, healthy reservoir levels and a supportive base, are likely to sustain the positive trend. The ongoing harvest season in northern regions is also set to boost farmers' cash flows, further encouraging tractor purchases. For FY25, while MM tractor volumes grew 12% YoY, Escorts tractors grew just 1% YoY.

* Valuation and view: While Mar’25 dispatches were steady, overall demand still remains weak in most 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 also like MM given the uptrend in tractors and healthy growth in UVs. Among ancillaries, we prefer MOTHERSO, ENDU and HAPPYFORG.

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