Launches to drive Feb PV sales; 2-wheelers may be strained: MOSt

As auto majors get set to announce February sales figures, Motilal Oswal foresees new launches driving passenger vehicles (PVs) segment, while two-wheelers could be strained on demonetisation woes. Simultaneously, pre-buying should aid volumes of commercial vehicles (CVs), it believes.In PVs space, the brokerage house expects Maruti Suzuki's volumes to grow 20 percent year-on-year for February, an outperformance to the entire PV industry. This volume spike may be driven by growth in compact utility vehicles (UVs) and supported by Baleno, it said. “Besides this, the launch of Ignis is likely to contribute to marginal incremental volumes,” Motilal Oswal said in a report. Meanwhile, Tata Motors’ PV segment could be driven by Tiago and complemented by the newly-launched Hexa, the research firm observed. “Tiago enjoys a waiting period of 1 month (down from 2-3 months), while Hexa has a waiting period of 8 weeks,” it added. In CVs and two-wheelers, the brokerage house expects Ashok Leyland and TVS to outperform the overall segments, respectively. The situation for two-wheelers could improve month on month (MoM), its volumes could be stressed YoY. Hero MotoCorp’s volumes are likely to decline 6 percent YoY due to high exposure to rural market. The region is only gradually recovering from the impact of demonetisation. However, the urban market is recovering fast, according to Motilal Oswal. It expects Bajaj Auto’s volumes to decline 5 percent YoY on the back of headwinds such as sluggish exports and fall in domestic motorcycles and three-wheelers. “We expect Eicher Motors' Royal Enfield volume growth to moderate to 22 percent YoY in February 2017. Situation in two-wheelers is expected to improve MoM as demonetisation impact wanes off. However, managements of 2W OEMs (original equipment manufacturers) have indicated that a return to normalcy is still a couple of months away,” the report from brokerage added. In the commercial vehicles (CVs) space, players may record robust sales, driven by pre-buying due to change in emission norms post April, the research firm said. It expects CV players to record double digit growth. “Ashok Leyland is expected to register 19 percent YoY growth. VECV is likely to witness 10 percent YoY growth, supported by high level of discounting. Meanwhile, market leader Tata Motors’ CV business is likely to see modest 4% YoY growth in Feb-2017,” the brokerage house added in the report.Among the brokerage firm’s top picks are Maruti Suzuki and Tata Motors in large caps, while it favours Amara Raja in the midcap space.