Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  
Google
Web www.equitybulls.com
Research

| 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 feedback@equitybulls.com

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. www.equitybulls.com, 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. www.equitybulls.com 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:

ICRA revises banking sector outlook to Stable from Positive

Massive shift in career aspirations as 8 out of 10 professionals eye new career paths this appraisal season, reports apna.co

ICRA: Annual securitisation volumes estimated at Rs. 1.88 lakh crore for FY2024

46% of women opted for used cars in March 2024 in the country: Spinny Reports

Addressing data privacy, security and ethical challenges is essential for the responsible adoption of GenAI in healthcare: PwC India report

Retail pools continue to display stable performance across various asset classes: ICRA

ICRA predicts small finance banks will raise over Rs 10,000 crore in FY 2024, up from Rs 6,400 crore in FY2023

CRISIL Ratings: Complex fertilisers volume to grow 4-5% next fiscal

Issuances of securitised debt instruments (SDI) by corporate entities to rise to Rs 100 crore in FY2024: ICRA

Godrej Interio's 'HomeScapes' Study reveals Indians want ‘Me-Time’ at home

GDP growth to moderate to 6.0% in Q3 FY2024, led by agriculture and industry: ICRA

Indian stock exchanges rank first in the world in terms of the number of IPOs in 2023

CRISIL Ratings: After soaring this fiscal, airlines to land >20% operating profit growth next fiscal

Rising frauds propel demand for AI/ML strategies: Experian Study

Cement makers to add 150-160 MTPA capacity by fiscal 2028 - CRISIL

Investor exuberance propelling broking industry performance, MTF achieves a new high: ICRA

CRISIL Ratings: Securitisation volume up ~20% in first nine months of this fiscal

India is fastest growing large economy globally in CY2023-CY 2024 - Pantomath Report

CRISIL Ratings: Market share of gold-loan NBFCs steady despite bank competition

CRISIL Ratings: Vehicle loan AUM to vroom past Rs 8 lakh crore next fiscal

45% of Newbie traders claim that 'not knowing enough' is the primary reason for losses incurred in Futures & Options trading - Sharekhan's survey reveals

CRISIL Ratings: Agri pump makers to see 7-9% revenue growth next fiscal

Indian mutual fund industry likely to sustain its strong inflows in 2024: ICRA Analytics

CRISIL Ratings: Operating profit of offshore rig operators to swell 30% next fiscal

CRISIL Ratings: Organised F&G retailer revenue to grow in mid-teens next fiscal

CRISIL Ratings: Shippers see a further revenue dip of 5-7% next fiscal as charter rates course correct

82% of professionals are concerned about job redundancy due to emerging technologies: Hero Vired Report

UPI transactions witnesses 118% rise at retail stores in 2023: PayNearby Report

Happy Forgings Limited - IPO - A trusted supplier for several Indian and Global OEMs - Reliance Securities

CRISIL Ratings: Penetration of electric buses set to double next fiscal

India's refined copper consumption to grow by 11% in FY2024, despite global headwinds: ICRA

CRISIL Market Intelligence and Analytics - Curb on cane juice for ethanol - Sugar output lift

Stable Repo Rates to Keep the Momentum Going for the Housing Market - Anuj Puri, Chairman - ANAROCK Group

Payback period for investment in sustainable warehouses come down to three years in India: A JLL - IndoSpace report

CRISIL Ratings - Profit margins of cotton yarn spinners to plunge 250-350 bps to decadal lows of 7-8% this fiscal

Government, PSUs, and Defence sector experience 14% upsurge in hiring: foundit Insights Tracker

CRISIL Ratings: Spirits high for organised liquor makers, revenues seen up 13%

Corporate bond market to more than double by fiscal 2030 - CRISIL

Gas Utilities : Gas consumption at record highs, growth now to trickle - Kotak Institutional Equities

Emkay and Geojit increase target prices of LIC, expect over 20% upside

CRISIL Ratings: Mall area to rise by 35% over the medium term on retail surge

Crop & Chemical Dashboard: Bottom is near, recovery unclear - Kotak Institutional Equities

Loan sell-downs of personal loan pools may see a temporary pause following the RBI's decision to increase risk weights: ICRA

India Surges Ahead in 5G Deployment, Paving the Way for a High-Tech Future!

CRISIL Ratings: Construction equipment revenue to grow 14-15% this fiscal

India to contribute 22% to the Global ER&D sourcing market by FY30: BCG-nasscom Report

CRISIL Ratings: In a decadal first, revenue of agrochemicals makers to slip ~3% on tepid demand this fiscal

CRISIL Ratings: Flexible packaging industry stares at decadal low profitability as oversupply stings

CRISIL Ratings: Domestic demand, softer cotton prices to sustain RMG growth

CRISIL Ratings: Higher workplace occupancy to light up cigarette volume 7-9%


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

disclaimer copyright © 2005 - 2020