Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  

| More

Automobile Sector - Monthly Quick View - May'22 - Steady Performance Improvement, backed by Gradual Rural Recovery

Posted On: 2022-06-11 13:26:52 (Time Zone: IST)

Mr. Mitul Shah - Head of Research at Reliance Securities.

As per the Society of Indian Automobile Manufacturers (SIAM), domestic auto sales volume (excluding CVs) grew by 245% YoY (up 8% MoM) to 15,32,809 units in May'22. Notably, all segments of the automobile industry witnessed a strong YoY performance due to low base (as May'21 was impacted by Covid-2 wave). Therefore, MoM improvement is more meaningful rather than YoY. Rural recovery supported the performance of 2Ws in May'22. Despite, component supply constraint and ongoing geopolitical issue continue to impact consumer sentiment to some extent, overall demand remained strong on YoY basis as well as MoM. It witnessed sequential improvement due to marriage season, gradual recovery in the rural market and reduction in fuel prices. Overall demand level remained below pre Covid level across segments. The wholesale volume was higher than the retail due to inventory built up citing better sales during ongoing marriage season and expected rural improvement ahead with normal monsoon. Rural market has exhibited signs of improvement because of better crop realisation at higher pricing, however, rural sentiment got impacted towards end of the month due to wheat export ban. Channel check suggests that overall sales performance started improving in FY23 so far, backed by all around recovery, and rationalized fuel prices. We expect volume improvement to continue steadily with likely normal monsoon driven by rural recovery over the next 3-4 months, while it would pick up in 2HFY23 with beginning of festivals and likely healthy agri output.

PV Segment: Overall, PV volume grew by 185% YoY (flat MoM) to 2,51,052 units, primarily impacted by semiconductor supply shortage. UVs sales grew by 157% YoY (down 9% MoM), led by a higher production of new models by key OEMs. While MPV volume grew by 695% YoY (down 7% MoM), PC sales increased by 199% YoY (up 10% MoM) in May'22. Semiconductor issue eased out bit sequentially due to diversion of some shipments from Russia to Asian countries amid ongoing geopolitical issue but remained unresolved fully, impacting production. Therefore, waiting period for most products still remains high.

Scooter & Motorcycle Segment: Scooter sales grew by 660% YoY (up 6% MoM), while motorcycle sales grew by 178% YoY (up 12% MoM). Overall, domestic 2W volume grew by 253% YoY (up 9% MoM). Moped sales grew by 393% YoY (down 9% MoM). Further, 2W production was 1% higher than the sales in May'22. Overall, two-wheeler sales improved due to the rural recovery.

3W Segment: Domestic 3W sales increased by 2x YoY (up 36% MoM) to 28,542 units on a low base. 3W passenger carriers' sales volume grew by 2.8x YoY (up 60% MoM), while 3W goods carriers' sales volume grew by 1.2x YoY (down 6% MoM) in May'22.

CV Segment: SIAM has stopped reporting the monthly CV volume performance since the beginning of FY21 due to unavailability of monthly CV volume data of select OEMs, and hence reports a quarterly volume performance. Thus, we analyse the data on a quarterly basis.

Exports: Overall, exports de-grew by 1% YoY (down 11% MoM) to 4,32,227 units. PV exports grew by 79% YoY (up 22% MoM), while 3W exports decreased by 38% YoY (down 23% MoM). Motorcycle exports de-grew by 3% YoY (down 13% MoM) in May'22. While container availability, semi-conductor supply issue for high end bikes and geopolitical issues in few regions impacted exports sales, it is expected to improve in the coming month.

Inventory: In the PV segment, inventory decreased at the company level, as production was 4% lower than the sales volume. In the 2W segment, inventory increased at the company level, as production was 1% higher than the sales volume.

Our View: Due to ongoing slowdown and negative implications of geopolitical issue, we expect demand to remain subdued over next 2-3 months, while gradual recovery is expected towards end of 1HFY23. Moreover, recent global geopolitical issues amid Russia-Ukraine war have negative impact on business environment, which creates negative demand sentiment for consumption. We expect the impact of a slower recovery and higher raw material cost on auto makers' profitability in 1QFY23, due to sharp run up in commodity cost and lag effect of passing on the same to end customers. Moreover, its impact on margins would be felt in 1HFY23 as well. However, we believe that gradual price hike and volume recovery would improve operating margins in 2HFY23. Moreover, semiconductors supply constraints and container availability issues are expected to impact sales and production in the near term, which we believe would get resolved in 2HFY23. We expect the 3Ws and M&HCV segment to witness a strong double-digit volume growth in FY23E. We believe the long-term fundamentals continue to remain intact for the automobile sector. We remain constructive on two-wheeler stocks amid attractive valuation. We expect the 2W segment to bounce back in domestic as well as exports in FY23. Along with a valuation comfort, the risk-reward is favourable, which would give a strong outperformance going ahead. We also like PV segment amid number of new launches next year and strong demand outlook supported by healthy order book. Therefore, TVS Motor, M&M and Maruti Suzuki continue to remain as our top picks. TVS still remains our top conviction BUY idea.

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

Gladiator Stocks - Minda Industries - ICICI Direct

Reliance Industries - Company Update - In fine fettle amidst global uncertainty - BUY

Sector Update - Sugar - ICICI Direct

Initiating Coverage - Hindustan Aeronautics Ltd - ICICI Direct

Rallis India - Company Update - Margin pressure likely to persist in near term..!! - Upgrade to 'BUY'

Indoco Remedies - Q4FY22 Result Update - In-line quarter; strong revenue guidance for US & EU mkt - Upgrade to 'BUY'

Indraprastha Gas - Q4FY22 Result Update - Impressive performance - BUY

KEC International - Annual Report Analysis - Healthy outlook across business segment - Accumulate

Westlife Development - Q4FY22 Result Update - Approaching the tipping point; Buy for LT Gains

Reliance Research downgrades Bajaj Auto to Sell

NOCIL - Q4FY22 Result Update - Strong operating performance amidst challenges - BUY

Gujarat Gas - Company Update - Deftly negotiating through tough times - BUY

Orient Electric - Gaining market share via innovation: initiate with ADD - ICICI Securities

Manappuram Finance - Q4FY22 Result Update - Intense Competition Put Pressure on Yields - BUY

Derivatives Weekly View - June 24, 2022 - ICICI Direct

Stock Tales - Newgen Software - ICICI Direct

Weekly Report - June 25, 2022 - Mr. Mitul Shah - Head of Research at Reliance securities

Gladiator Stocks - Bosch - ICICI Direct

Management Meet Update - Sheela Foam - ICICI Direct

Gladiator Stocks - Mahindra & Mahindra - ICICI Direct

Banks - Modifications to PPI and its impact on cards - Negligible impact, if any, for stocks under coverage

LIC Housing Finance - Q4FY22 Result Update - Fixed rate liabilities could cushion NIM - BUY

Navneet Education - Q4FY22 Result Update - Growth levers in place - BUY

MPC Minutes: Jun-22: All eyes on inflation - Acuité Ratings

Nazara Technologies - Management Meet Update - Breaking through the ESports landscape - BUY

Sector update - Quick Service Restaurants - YES Securities

JK Lakshmi Cement - Q4FY22 Result Update - Strong performance; Valuations drive upgrade - Accumulate

Would it be wise to invest in a home early in your career?

Dr. Reddy's Laboratories - Analyst Meet Update - Multiple growth initiatives - BUY

Dhanuka Agritech - Management Meet Update - 1Q likely to be subdued; all hopes pinned on the monsoons - BUY

BUY Ipca Laboratories - Q4FY22 Result Update - Weak exports; gradual recovery

Acuité expects India's current account deficit to widen to more than USD 90 bn in FY23 - Acuité Macro Pulse

Inflationary concerns will continue to weigh on the pace of economic revival in FY23 - Acuité Macroeconomic Performance index

City Union Bank - Q4FY22 Result Update - Asset quality on the mend - BUY

Banks - BNPL - Early results are not that exciting as yet - Kotak

Acuité expects FY23 GDP growth estimate at 7.5% - Acuité Macro Pulse - Growth - May-22 Edition

Base factor pushes up IIP in Apr-22 to an 8-month high - Acuité Ratings

India Strategy & Q4FY22 Review - Long term growth prospects to overshadow near term uncertainties

India Equity Strategy - Quarterly flipbook: Q4FY22-Cost inflation driving downgrades

FMCG - D2C is here to stay; omni-channel the way forward - HDFC Securities

BFSI - New normal rate cycle; brace for transmission effects - HDFC Securities

SBI Cards and Payment Services - BUY - TP Rs. 1260 - YES SECURITIES

RBI frontloads rate hike amid increased inflationary headwinds - Acuité Ratings

Monetary Policy June 2022 - Axis MF Views

RBI Monetary Policy View - Mr. Dhiraj Relli, MD & CEO, HDFC Securities

Monetary Policy - entering the red zone - Anuj Puri, ANAROCK

Mr. Murali Ramakrishnan, MD &CEO, South Indian Bank on RBI Monetary Policy

Comments on RBI's MPC Policy Jun'22 - Acuité Ratings

Views on RBI Monetary Policy - June 2022

Bayer Cropscience - Q4FY22 Result Update - Healthy all round performance - BUY

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020