Moneycontrol News
With the onset of a new month just around the corner, automobile companies will be reporting their monthly sales data.
Broking firm Motilal Oswal expects passenger vehicles (PVs) and two-wheelers to report healthy dispatch growth, while heavy commercial vehicles could see gradual retail recovery from second quarter of FY18.
Further, it stated that two-wheeler and PVs wholesale volumes could be healthy, led by
i) Inventory build-up to meet festive demand
ii) Gradually improving retails with well-spread monsoon boosting rural sentiment. Growth in CV segment will be largely led by LCVs/ICVs.
Its channel checks indicate healthy retail growth on the back of good demand from key states. “Factors such as good monsoon and better crop realizations have lifted sentiment in rural/semi-urban areas. Pre-festive demand is evident in states like Maharashtra and Gujarat,” Motilal Oswal said in a report.
Moneycontrol breaks down the brokerage’s auto sales preview:
The PV segment could grow by 12 percent year on year, while the CV segment could rise by 8 percent YoY.
The volumes are expected to rise 12% YoY, as tractors volumes are expected to increase by 22% YoY and UV volumes by 11% YoY. However, 3W sales are expected to decline 10% YoY.
Two-wheelers
It expects Honda Motorcycles and TVS Motor’s wholesales to increase at 12 and 9 percent, respectively. This shall be led by improving retails in key states and inventory build-up to meet festive demand, the report added.
Meanwhile, it expects Bajaj Auto to record sales of 3.6 percent year on year due to weak 3-wheeler and export sales.
In case of Royal Enfield, its volumes could grow 17.5% YoY to 65.5k units. “With commissioning of third plant in last week of August, we expect gradual ramp-up from 2HFY18 onwards,” the report added.
Commercial vehicle manufacturers
Motilal Oswal expects growth in wholesales, led by strong growth in LCV sales. We expect Ashok Leyland’s wholesales to grow 9.7% YoY (LCVs +13% YoY, HCVs +8.5% YoY), while Tata Motors and VE Commercial Vehicles’ CV sales are expected to grow 8.2% and 17%, respectively.
Overall, the broking house said that it preferred four-wheelers over 2Ws and CVs due to their stronger volume growth and helped a stable competitive environment. “While we expect 2W volumes to benefit from rural recovery in the near term, competitive intensity remains high in the segment due to changing customer preferences,” it said in its report.
Top picks: Tata Motors, Maruti Suzuki and Amara Raja. It also considers Mahindra & Mahindra as the best bet on rural market recovery.
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