Automobiles
Sep-17 Sales Estimates
Healthy retails, discounts to drive 2W/PV wholesales
CV dispatches expected to be healthy too
"As a trend, we are seeing
huge spike in our customer
walk-ins and overall retails
in every festival, be it
Ganesh Chaturthi, Onam or
even the beginning of
Navratri."
Our channel checks indicate healthy retail growth (10-15%) in the 2W and PV segments,
led by festive demand and positive rural sentiment, which should drive wholesales for
September. CV segment growth is expected to be largely led by LCVs and ICVs. Also, there
have been no indications of moderation in discounts in the CV segment.
Our interaction with mass market 2W channel partners indicates healthy growth, led by
strong retail demand from key states. Good monsoon and an increase in crop realizations
have lifted sentiment in rural/semi-urban areas. Hero MotoCorp (HMCL) is witnessing
~10% retail growth in key states, while TVS Motor (TVSL) and HMSI are outperforming the
industry, with growth in excess of 15%. However, Bajaj Auto’s (BJAUT) retail volume
growth for key markets is at 7-9%, lagging other OEMs. On the PV front, MSIL is witnessing
retail growth in excess of 15%, while Mahindra & Mahindra’s (MM) volumes are increasing
at ~8-10%.
Key highlights:
n
MSIL’s domestic dispatches growth is expected at 19% YoY. Demand for
Baleno,
Brezza
and the new
Dzire
continues to be robust, as these models enjoy a healthy
waiting period of 2-3 months. Within its domestic portfolio,
CIAZ’s
sales are expected
to be weak (-16% YoY) due to the GST-led impact on hybrid cars, while growth in the
compact segment (+40% YoY) is likely to be driven by the new
Dzire.
n
Tata Motors’ (TTMT) PV segment is expected to grow 25% YoY, led by inventory build-
up of its first compact SUV
Nexon.
CV sales are expected to grow 11.5% YoY, led by a
15% increase in LCV sales, while M&HCV sales are expected to grow 7% YoY.
n
MM’s volumes are expected to increase by 3.4% YoY, with tractors volumes growing
by 4.7% YoY and UV volumes by 6.6% YoY. However, 3W sales should decline 28% YoY.
n
In the 2W segment, TVSL’s sales are expected to increase 15%, while BJAUT and
HMCL’s sales are expected to grow by 2% and 4%, respectively.
n
We expect RE volumes to grow at a healthy 21% YoY to 70k units.
n
CV manufacturers are expected exhibit an improvement in wholesales, led by strong
growth in LCV sales. We expect AL’s wholesales to grow 31.5% YoY (LCVs: +24.4% YoY;
HCVs +33.9% YoY). TTMT and VECV’s CV sales are expected to grow 11.5% and 10.8%,
respectively.
n
We prefer 4Ws over 2Ws and CVs due to stronger volume growth and a stable
competitive environment for the segment. We expect 2W volumes to benefit from a
rural recovery in the near term, but also note that the segment faces intense
competition due to changing customer preferences. For CVs, we expect a gradual
volume recovery from 2HFY18.
n
Our top picks are TTMT, MSIL and Amara Raja (AMRJ). We also consider MM as the
best bet on a rural market recovery.
Sector Update | 28 September 2017
Automobiles | Update
YS Guleria,
Sr VP, Sales and
Marketing
HMSI
Jinesh Gandhi
(Jinesh@MotilalOswal.com); +91 22 3982 5416
Deep Shah
(Deep.S@MotilalOswal.com); +91 22 6129 1533
28 September 2017
Investors are advised to refer through important disclosures made at the last page of the Research Report.
1
8
a
ugust 2016
1
Motil
A
l Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.