Sector Update | 1 July 2024
Automobiles
Jun’24 wholesales remain a mixed bag
Tractor wholesales outshine despite weak retails
In 2Ws, while HMCL’s numbers were ahead of our estimates, TVSL/BJAUT/RE’s numbers
remained in line. In PVs, while domestic dispatches of MSIL/MM were in line, exports of MSIL
surprised. TTMT disappointed as the company focused on lean channel inventory against the
backdrop of weak retail sales. In CVs, both TTMT and AL’s wholesales remained in line and
declined by a single digit YoY, while VECV surprised with double-digit YoY growth. The CV
industry’s demand held up well in 1QFY25, and we continue to expect the industry to post
mid-single-digit growth for FY25. In tractors, both M&M and ESC’s sales were ahead of
estimates, with the progress of monsoon being the key monitorable. We expect PVs and CVs
to post 6% volume CAGR each over FY24-26. We anticipate the 2W industry to clock a 9%
volume CAGR during the same period. In Auto OEMs, MSIL and AL are our top picks.
Aniket Mhatre – Research Analyst
(Aniket.Mhatre@MotilalOswal.com)
Research Analyst: Amber Shukla
(Amber.Shukla@MotilalOswal.com) |
Aniket Desai
(Aniket.Desai@MotilalOswal.com)
2Ws (above est.):
Wholesale dispatches for HMCL (above est.) /BJAUT (in line)/
TVSL (in line) grew 15%/3%/6% YoY to 503.45k/303.6k/322.2k units. Export
dispatches for TVSL declined 3% YoY to 66.4k units but grew 7% YoY to 177.2k
units for BJAUT albeit on a low base. TVSL indicated that export dispatches were
hit by lower container availability on account of the Red Sea crisis. RE posted 5%
YoY decline in wholesales at 73,141 units (in line).
PVs (in line with est.):
MSIL’s volumes for Jun’24 came in at 179.2k units (grew 12%
YoY) and were above our estimates largely due to strong exports. While domestic
volumes for MSIL grew in line at 6% YoY to 148.2k units, exports surged 57% YoY to
a record high of 31k units (1QFY25 export wholesales have grown 12% YoY).
MM’s UV volumes (including pick-ups) were up 11% YoY to 59.9k units due to the
strong growth of UVs at 23% YoY. TTMT’s PV volumes declined 8% YoY to 43.6k
units and were below our estimates. TTMT indicated that it has proactively reduced
wholesales to keep channel inventory under control amid a weak retail demand.
Further, the EV fleet sales were affected majorly in 1QFY25 due to expiry of FAME-
2 subsidy in Mar’24 (TTMT’s EV sales declined 34% YoY to 4,657 units). The
company remains optimistic of a pick-up in demand in the coming months as
enquiry levels remain healthy and facilitated by the onset of festive season from
August. Overall, both UV and Car segments grew 9.0%/7.5% YoY.
CVs (in line with est):
Overall MHCVs grew 2% YoY, while LCVs declined 5% YoY.
CV sales for TTMT declined 7% YoY (MHCVs grew 3% YoY while LCVs declined
14% YoY)
in Jun’24 (in line with estimates) to 32k units. The company indicated
that while HCV demand held up, market sentiment for the MCV segment
remained positive. Even Bus demand continued to remain positive. Going
forward, CV demand is likely to be steady on the back of a healthy monsoon
forecast, expectation of policy continuity, and continuous push for infra. AL’s
wholesales declined 2% YoY to 14.9k units (in line with est.). VECV’s CV sales
grew 11% YoY to 7.4k units (above est.).
Tractors (above est):
MM’s tractor volumes grew 6% YoY to 47.3k units (above
est.). As per M&M, the government's announcement of increased food grain
production, an increase in MSP for major Kharif crops, and further advancement
of the Southwest monsoon across the country have driven positive sentiments
among farmers. With retail momentum having picked up, supported by land
preparation and an increase in Kharif crop sowing, demand for tractors is likely
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
1 July 2024
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Investors are advised to refer through important disclosures made at the last page of the Research Report.