Volumes of all automobile companies witnessed an uptick in September 2017, mainly due to a slightly earlier festive season (Diwali falls in mid-October 2017 versus end-October 2016), however general underlying demand remains strong and to get a more comprehensive picture volumes should be looked on a combined basis (September + October). Wholesale volumes benefitted from a certain level of inventory stocking for both 4Ws (M&M UVs, Tata) and 2Ws (Hero, TVS and Bajaj).
* Passenger vehicles – Strong festive demand boosts volumes: Maruti reported overall volumes of 163k units – growth of 9% YoY. Domestic volumes were up 10% YoY, even as exports remained flat sequentially, we expect retails growth to be ~15-20% YoY with volumes largely driven by new launches (Baleno, Brezza and new Dzire). Similarly, TTMTs passenger reported 18% YoY growth on back of new launches (will watch this space as it could be initial channel filling). M&M’s UV volumes (up 26% YoY) benefited from the festive demand and upgradation/refreshes of its existing models.
* Two-wheelers – HMCL, Eicher post strong volumes: Royal Enfield reported volume of 70,400 units – up 22% YoY with the 350cc motorcycle registering growth of 27%. The ~4% MoM increase for RE seems to indicate that production ramp up is on expected lines. Our channel checks suggest that the waiting period for the core 350cc motorcycle remains in the range of 4-5 weeks. Hero MotoCorp’s volumes grew 7% YoY at 720k units, highest monthly sales ever, while TVS Motor’s 2W sales were up ~22% YoY (scooter volumes grew by 43% YoY).
* CV volumes -Strong growth for M&HCVs continues: M&HCV volumes registered a robust growth, partially due to improved availability of BS IV vehicles and restrictions on overloading creating demand for higher tonnage vehicles. Ashok Leyland’s M&HCV volumes rose 32% YoY. Tata Motors also reported growth of 31% on back of a strong numbers from the ICV segment.
* Tractors benefitted from strong festive demand: M&M’s domestic tractor volume was up 51% YoY, while Escorts reported growth of 35% YoY. Momentum in tractor volumes could continue, primarily driven by a second consecutive year of normal monsoon and expectations of record crop production.
* Our view: While September benefitted from a mismatch in festive season, retails for most of the players have been strong and we expect the combined volumes for September and October to indicate strength in underlying demand. We continue to prefer players with clear competitive advantages and waiting periods on key products. Maruti Suzuki continues to remain our top pick.
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