February is a seasonally weak month for most auto dealers and analysts noted that there was a slight slowdown in enquiry level, but the retail sales are expected to grow at 8-12 per cent YoY across auto segments.
Driven by a healthy uptick in the urban markets, coupled with the marriage season in northern regions that account for 20-25 per cent of total demand in key states such as UP and Bihar, two-wheeler demand has slightly improved, said Motilal Oswal Securities. This, it said, is expected to drive 10-12 per cent YoY growth in retail volumes.
“PV retails are expected to grow 6-8 per cent YoY. There has been an 8-10 per cent drop in the enquiries across OEMs, which is expected to result in a sequential volume decline for the month. However, overall sentiments are still positive as booking trends remains healthy. Our channel checks suggest CV volumes to grow 11-13 per cent YoY during the month,” it said.
Nomura India said it prefers OEMs with strong model cycles driving market share gains, such as Mahindra & Mahindra Ltd (M&M), TVS Motor Ltd and Ashok Leyland Ltd. A rise in electrification and content per vehicle will be the key value drivers for suppliers, it said while keeping a positive stance on Sona BLW Precision Forgings, Uno Minda and Sansera Engineering.
YES Securities said Ashok Leyland, Eicher Motors, Tata Motors, Maruti Suzuki Ltd and TVS Motor are its top OEM picks. This brokerage expects two-wheelers to report 8-10 per cent MoM growth in retails, along with inventory moderation. PV retails, it said, may see single digit decline MoM. Heavy pre-buy are likely in CVs ahead of OBD2 norms from April 1, leading to 15 per cent-plus MoM growth in retails. Tractor segment volumes seen flattish MoM.
Motilal Oswal Securities said it prefers four-wheelers over two-wheelers, on the back of strong demand along with a stable competitive environment. We expect the CV cycle to maintain its momentum.
“We prefer companies with higher visibility in terms of demand recovery, a strong competitive positioning, encouraging margin drivers, and a strong balance sheet. Ashok Leyland is our top OEM pick. We also prefer Hero MotoCorp as a pure play on the domestic 2W demand recovery. Among auto component stocks, we prefer Motherson Sumi & BHFC,” it said.
LKP Securities said it prefers Bajaj Auto among the two-wheeler players, as exports seemed to have bottomed out and can see only upside from current levels. In the CV space, the brokerage likes Tata Motors and Ashok Leyland. M&M is its favourite pick in the tractor segment.
“With demand expected to remain robust, we expect PVs to be the best placed segment in medium to long term and Tata Motors shall continue its excellent performance even better once the supply issue resolves. M&M and Maruti SUzuki are also witnessing a strong order book thus offering a good visibility to their volumes. Their SUV portfolio lends them a good comfort,” LKP Securities said.
Nomura India expects Maruti Suzuki’s domestic PV wholesales (excluding OE and LCV) to be up 5 per cent YoY in February 2023. This implies 42 per cent market share, flattish month on month (MoM). It expects retail sales for Maruti to be lower than wholesales in February and inventory to be at 3 weeks. It, however, expects improvement in market share to 43-44 per cent in FY24F, led by likely launches of Jimny and Fronx SUVs.
For M&M, UV volumes are seen rising 16 per cent YoY at 32,000 units, aided by a strong model cycle and healthy order book.
For TVS Motor it sees domestic sales rising 25 per cent YoY, offset by weak exports, leading to 1 per cent YoY decline in overall volumes. Hero Motocorp is seen reporting 8 per cent growth in February YoY sales; Bajaj Auto may log a 10 per cent YoY drop in sales on weaker exports, Nomura said while expecting Royal Enfield’s volumes to grow at 18 per cent, benefiting from continued demand for its Hunter 350.
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