Sector Update : Demand trend: 2W +ve, PV/CV flat, tractor -ve - Yes Securities
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Key Pointers for Feb’24:
* 2Ws - Weak HMSI supply aids peers; optimum inventory levels.
* PVs – CNG gains prominence in South market (diesel/petrol dominated).
* CVs – Fleet sentiments neutral, expected pause in new tender-based business.
* Tractors – No major subsidy announcements for second month in a row.
Our interaction with leading channel partners hints at a mixed retail demand scenario for Feb’24: 8-10% YoY growth for 2Ws, flat for PVs, mid-single digit decline led by prebuy ahead of OBD2 last year for CVs, and high single digit decline YoY for tractors. Within 2Ws, semi-urban/rural growth continue to exceed urban growth in states like Maharashtra (led by high base) and at par in other markets. Marriage season-related retails off-take would grow by 8-10% YoY. How customers respond to recent price cuts will be clear in due course but a knee jerk reaction with initial impact is visible. In PVs, CNG salience is improving in Southern states with CNG infra-availability going up. Having said that, southern CNG contribution is currently 4-5% overall (vs 8-10% in fleet segment). CV inventory is likely to stabilize at ~20-25 days, partly led by inventory restocking with full liquidation of 2023 make. Discounts have moderated MoM in Feb’24 with price effective hikes of 1-1.5% ensuring healthy net pricing to OEMs.
Key wholesale expectations – MSIL at ~171k (-1% YoY/ -14% MoM), AL at ~17.5k (- 5.8% YoY/ +9.8% MoM), Royal Enfield at 71k (-0.8% YoY/ +6.8% 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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