Auto sales data for May is likely to be healthy for personal vehicle (PV) and two-wheeler makers, even as makers of commercial vehicles (CVs) may see decline in volumes, analysts said who see Maruti Suzuki leading the growth in PV segment, Ashok Leyland logging best growth in medium & heavy commercial vehicle segment.
Two-wheeler makers may see double digit volume growth due to marriage season, replacement demand and low a base. PV volumes may also grow in double digits, thanks to launches and better supplies. CV sales are likely to have declined a little due to early buying last quarter, said Anand Rathi, which added that tractor volumes may fall slightly as high base catches up, said Anand Rathi. This brokerage has Tata Motors, Eicher Motors and Hero MotoCorp as its preferred picks.
Within two-wheeler stocks, Nomura India prefers Bajaj Auto and within four-wheelers it likes M&M, Tata Motors and Ashok Leyland due to their ability to gain market share.
For May it estimated PV industry wholesales at 3,31,000 units, up 12 per cent YoY. However, retails were lower, leading to 15,000 of inventory build-up, Nomura India said.
"We maintain our PV industry growth estimate at 6 per cent YoY y in FY24F. In 2Ws, we expect 22 per cent YoYgrowth, on a low base (May-23 volumes are still down 18 per cent from last peak levels in May 2018). We expect MHCV wholesale volume to be up 6 per cent YoY. For tractors, we expect volume to decline by 9 per cent YoY in May-23. We build in flat volumes for FY24F," Nomura India said.
In a note, Prabhudas Lilladher said PV segment inventory levels are currently at 30-35 days, which is manageable. In the two-wheeler segment, inventory levels are generally under control, but leading OEMs have higher inventory (40-45 days). Overall, the industry has around 20 days of inventory, it noted. This brokerage has 'Buy' ratings on Maruti Suzuki, Tata Motors, TCS Motor, Hero MotoCorp, M&M, Eicher Motors and Ashok Leyland.
"Our interactions with leading channel partners indicate a sustained recovery in domestic 2W demand as the retail is expected to grow 3-5 per cent YoY led by healthy demand in urban and low base of last year. However, despite marriage season, rural demand has not yet witnessed a broad-based revival. MHCV retails are likely to decline 4-6 per cent YoY due to the pre-buying effect before OBD-2 transition in March and the impact of seasonality. On the other hand, bus demand continues to improve as retails are expected to grow by mid-single digit sequentially. Overall, in May, wholesales for PV/3Ws are estimated to grow 5.5 per cent/32 per cent YoY while 2W/CV/tractors are likely to decline 1 per cent/ 18 per cent/4 per cent YoY," Motilal Oswal said.
This brokerage prefers CVs over other segments, on the back of strong demand cycle over next few quarters along with a stable competitive environment. Motilal Oswal prefers companies with higher visibility in terms of demand recovery, strong competitive positioning, encouraging margin drivers and a strong balance sheet. It prefers Tata Motors.
Emkay Global expects the two-wheeler industry to benefit from broadening of the ongoing recovery, with the entry/rural segment supplementing the premium and urban categories on uptick in replacement demand.
It expects domestic volumes to improve 72 per cent for Bajaj Auto on a low base. It sees volumes to grow 25 per cent for TVS Motor, 30 per cent for Eicher Motors' Royal Enfield (RE) and 5 per cent growth for Hero MoroCorp.
"We note that market leader Hero MotoCorp's retail volume (as per Vahan) is up 11 per cent YoY on MTD basis (vs 4 per cent industry growth), taking cue from the 12 per cent growth over March-April(combined). Overall volume is expected at 75,000 for RE (18 per cent YoY), 2,85,000 for Bajaj Auto (14 per cent YoY), 3,05,000 units for TVS Motor (6 per cent YoY) and 5,00,000 units for HMCL (3 per cent YoY)," Emkay said.
OEM commentary, the brokerage said, has turned constructive, with Bajaj Auto guiding to 6-8 per cent industry growth in FY24 (including recovery in the 100cc segment) and HMCL reiterating its guidance of double-digit industry revenue growth this year.
In PVs, Emkay Global expect Maruti Suzuki to outperform even as semiconductor shortages continue to impact production. The research house estimates total volume growth of 10 per cent YoY for Maruti Suzuki (1,78,000 units). Domestic volume growth stood at 30 per cent YoY for M&M (on a low base; 35,000 units), while Tata Motors volumes are expected to grow 4% YoY (45,000 units).
Maruti Suzuki has highlighted that it expects the production loss to persist in the current quarter, with some improvement likely from July. Besides, M&M has intimated of a 10-12 per cent production impact from short semiconductor supplies.
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