Auto sales figures for December were tepid, but in line with analyst estimates. Brokerages said passenger vehicles' (PV) wholesale numbers were subdued and largely in line with expectations while numbers for medium-heavy commercial vehicle (M&HCVs) surprised negatively, despite being a seasonally strong period. Two-wheeler volumes growth was healthy, they said.
Nomura India said Bajaj Auto (Buy), TVS Motor (Neutral), Tata Motors (Buy) and Mahindra & Mahindra Ltd(Buy) reported ahead-of-industry growth while Royal Enfield (Eicher Motors, Neutral) Hero MotoCorp (Neutral), and Ashok Leyland (Buy) and Maruti Suzuki India Ltd (Neutral) reported below-industry growth. M&M with a target price of Rs 1,980 is its preferred pick among auto names.
Sharekhan said Ashok Leyland, Tata Motors, Bajaj Auto, Maruti Suzuki and Hero MotoCorp are its preferred picks among auto stocks. Axis Securities said it remains selective and prefers TVS Motor and Bajaj Auto in the two-wheeler segment, Maruti Suzuki India in the PV segment; and Ashok Leyland in the CV space.
"We prefer 2Ws in the sector, followed by CVs. We are already witnessing a reversal in demand patterns, especially in the 2W segment; however, we still see better growth potential in 2Ws compared to other segments over FY23-25E. On the other hand, we are cautious about the PV growth outlook due to a slowdown in demand trends and a high base. M&M and Hero MotoCorp are our top OEM picks," Motilal Oswal said.
Brokerage Emkay Global said auto dispatches were largely subdued, barring the two-wheeler space, which witnessed healthy double-digit YoY growth. PV wholesales were largely flat as players rationalised the high-channel inventory even as discounts were at record levels to drive year-end retails, it said adding that commercial vehicle (CV) were subdued. Tractor volumes declined 17 per cent YoY due to a delay in crop harvest and lower rabi sowing, which in turn impacted rural sentiments, Emkay said.
"Recent volumes support our thesis of broadening of ongoing 2W recovery; we maintain our expectations of 2-3 years of growth upcycle here, on replacement-led demand upturn (with industry volumes still being 17 per cent below previous peaks," said Emkay Global.
JM Financial in a note said wholesales in the PV segment are likely to be a function of response to recent model launches and positive customer sentiment. Two-wheeler demand is expected to maintain the momentum, it said adding that steady freight rates are supporting CV operators. "High interest rates, however, remain a key deterrent. We expect CV volumes to be supported by demand from infra & construction sectors," it said.
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