Automobiles
July-17 Sales Estimates
Industry witnesses inventory build-up to meet festive demand
PV and 2W sales to see healthy growth in dispatches
Sector Update | 31
| Update
Automobiles
July 2017
” Retail sales have dropped
this month as there was an
advancement in purchases,
driven by market offers
announced in June.
Wholesale dispatches last
month, on the other hand,
were postponed to prevent
inventory devaluation to
the extent of around 5 per
cent. In July, the focus is
more on wholesale as
stocks were low across
dealerships.”
- RS Kalsi, executive director
(sales and marketing),
Maruti Suzuki India
2W and PV wholesales volume is expected to be healthy, led by inventory build-up to meet
festive demand and gradually improving retails post GST implementation. Growth in the
CV segment will be largely led by LCVs.
Our interaction with mass market 2W channel partners points toward a gradual recovery
in retails from the second half of July. Factors such as good monsoon and increase in MSPs
have lifted sentiment in rural/semi-urban areas. Pre-festive demand is evident in states
like Maharashtra and Gujarat.
Key highlights:
n
MSIL’s domestic dispatches growth is expected to come in at 11% YoY. Demand for
Baleno, Brezza and New Dzire continues to remain robust as these models enjoy a
healthy waiting period of 3-4 months. Within the domestic portfolio, CIAZ sales are
expected to be weak due to GST impact on hybrid cars (forms ~60% of CIAZ sales).
n
Tata Motors’ PV segment is expected to decline 5% YoY, while the CV segment is likely
to continue its downtrend with a decline of 3% YoY, led by a 12% fall in HCVs.
n
MM’s volumes are expected to increase by 7% YoY, as tractor volumes are likely to
increase by 25% YoY and UV volumes by 2.3% YoY. However, 3W sales are expected to
decline 27% YoY.
n
In the 2W segment (barring BJAUT), HMCL and TVSL wholesales are expected to
increase at a healthy 20% and 15%, respectively, led by improving retails in key states
and inventory build-up to meet festive demand. BJAUT is likely to record a decline of
2.3% YoY due to weak 3W and exports sales.
n
We expect RE volumes to grow at 19.9% YoY to 64k units.
n
CV manufacturers are expected to see a sharp recovery in wholesales, led by strong
growth in LCV sales. We expect AL to outperform other CV manufacturers, with 9.6%
YoY growth (LCVs +30% YoY, HCVs +3.9% YoY), while TTMT and VECV’s CV sales are
expected to decline by 3.2% and 2.7%, respectively.
n
We prefer 4Ws over 2Ws and CVs due to stronger volume growth and a stable
competitive environment. While we expect 2W volumes to benefit from rural recovery
in the near term, competitive intensity remains high in this segment witnessing
changing customer preferences. For CVs, we expect a gradual volume recovery from
2HFY18.
n
Our top picks are Tata Motors, Maruti Suzuki and Amara Raja. We also consider MM
as the best way to participate in rural market recovery.
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Jinesh Gandhi - Research Analyst
(Jinesh@MotilalOswal.com); +91 22 6129 1524
Deep A Shah - Research Analyst
(Deep.S@MotilalOswal.com);+912261291533/
Jigar Shah - Research Analyst
Jigar.Shah@MotilalOswal.com);+912239825402
31 July 2017
Investors are advised to refer through important disclosures made at the last page of the Research Report.
1
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.