Nomura prefers 4-wheelers, retains buy on Maruti post June sales

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26 Aug, 2025 12:21

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Nomura has maintained its preference for four-wheelers to 2-wheelers after June auto sales data announced last week. It has retained Maruti Suzuki as its preferred pick in the sector.

The brokeage house says medium and heavy commercial vehicles (MHCV) segment industry growth disappointed significantly at flat YoY compared to estimate of around 27 percent. Key disappointment was in Tata Motors with 11 percent YoY decline (first time in past two years).Ashok Leyland also disappointed with 8 percent YoY growth.

Nomura believes there can be downside risk to implied growth of around 28 percent (around 12,500 units per month) for Ashok Leyland over the rest of 9MFY17.

It has maintained thesis that Ashok Leyland enjoys peak margin, market share and valuations, hence scope for disappointment is low. Thus, it has a neutral rating on the stock, despite factoring in 25 percent MHCV growth in FY17.

Two-wheeler (2W) industry volumes were in line with around 12 percent YoY (based on reported numbers). Passenger vehicle (PV) industry volumes were largely in line with around 1.6 percent YoY growth against flat expectations YoY.

Maruti Suzuki's domestic volumes at 92,100 were down around 10 percent YoY, below the estimate of 97,000. Overall volumes were down around 14 percent YoY due to production losses because of plant shutdown and fire at supplier’s plant.Maruti expects to make up for the loss by higher production during rest of the year.

Mahindra and Mahindra's automotive volume growth of around 8 percent disappointed largely led by utility vehicles (UVs). UVs reported only 9 percent YoY growth against the estimate of 18 percent.

M&M's light commercial vehicle (LCV) growth of 2 percent was in line. "Volume recovery remains critical to achieve our implied growth of 18 percent YoY for the remaining 9MFY17," says the brokerage.Tractor volumes were ahead of estimates with around 20 percent YoY for Mahindra and Mahindra and 11 percent growth for Escorts.

For FY17, Nomura expects industry volumes to recover with 12/10 percent growth for PVs/2Ws. For MHCVs, it says it expects 25 percent growth, where there can be downside risk if current momentum is sustained. In tractors, it sees upside risk to 12 percent industry growth for FY17, given the strong demand environment.

Among the unlisted original equipment manufacturers, only Honda reported sharp 38 percent decline. Others like Hyundai were up around 10 percent while Toyota was up 30 percent (due to Innova Crysta ramp up). Ford/Renault also reported strong 109 percent/173 percent growth.Posted by Sunil Shankar Matkar