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

| More

Automobile Sector - Monthly Quick View - May'23 - Steady YoY and MoM Growth on Low Base; UVs are Clear Winner...

Posted On: 2023-06-14 20:19:28 (Time Zone: IST)


Research Analyst: Mitul Shah - Reliance Securities

As per the Society of Indian Automobile Manufacturers (SIAM), domestic auto sales volume (excluding CVs) grew ~18% YoY (up 9% MoM) to 18,08,686 units in May'23. Notably, all segments of the automobile industry witnessed a decent performance in domestic market, supported by healthy urban sales and steady recovery in rural, supported by healthy agri output at higher MSPs. However, exports continue to remain laggards. Industry witnessed strong YoY as well as MoM growth across segments. Marriage season helped industry's retail performance to some extent, while low base led to YoY growth. In PV segment semiconductor supply impacted production to some extent. On the other hand, 3W segments recorded healthy double-digit growth of >70% YoY. UV segment remained clear winner with highest growth of 33.5% YoY, contributing 54% to industry's PV volume.

Despite improvement, overall demand level remained below pre Covid level for 2Ws during the month. The wholesale volume was broadly in line with the retail. We expect volume improvement to continue gradually as nearly normal monsoon and higher water reservoir would support Kharif cropping and rural recovery in coming months. Recent IMD forecasting of normal monsoon further improves rural sentiment and likely better rural economy ahead. Industry would witness steady improvement in FY24 with decent agri output and cool off in inflation, turning customer sentiment positive coupled with stable pricing environment. EV penetration should improve further in 2023. However, near term challenges due to monsoon delay and heat wave may spoil the show and may put some challenge for automobile industry. Therefore, we would monitor the situation closely to gauge the FY24 performance for various segments of the automobile industry, which would depend on timing and distribution of 2023 monsoon.

PV Segment: Overall, PV volume grew by 15% YoY (up 1% MoM) to 2,88,369 units due to better semiconductor supply on YoY basis, new launches and decent retail sales in marriage season. UV sales grew by 34% YoY (up 5% MoM), led by a higher production of new models by key OEMs. While MPV volume grew by 19% YoY (up 22% MoM), PC sales decreased by 3% YoY (down 4% MoM) in May'23. Due to supply mis match and high demand, waiting period for most products still remain high.

Scooter & Motorcycle Segment: Scooter sales grew by 12% YoY (down 4% MoM), motorcycle sales grew by 21% YoY (up 18% MoM). Overall, domestic 2W volume grew by 17% YoY (up 10% MoM). Moped sales increased by 2% YoY (up 3% MoM). Further, 2W production was 1% lower than the sales in May'23. Overall, two-wheeler sales improved on a low base and due to bit of rural recovery and decent urban sales.

3W Segment: Domestic 3W sales increased by strong 70% YoY (up 14% MoM) to 48,732 units on a low base. 3W passenger carriers' sales volume grew by 91% YoY (up 12% MoM), while 3W goods carriers' sales volume grew by 8% YoY (up 40% MoM) in May'23.

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 declined by 22% YoY (up 5% MoM) to 3,39,132 units in May'23. PV exports decreased by 6% YoY (up 30% MoM), while 3W exports decreased by 7% YoY (up 11% MoM). Motorcycle exports decreased by 32% YoY (up 5% MoM) in May'23. Higher inflationary pressure, weakening demand, currency devaluation in few countries and issue of availability of currency (USD) impacted exports sales, it is expected to improve steadily in FY24.

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

Our View:

We expect the automobile industry to witness a steady volume improvement across segments in FY24 on the back of expected rural recovery ahead, supported by healthy agri output in Kharif season. As per latest IMD forecast, monsoon would be normal in 2023, despite ElNino effect, which indicates ElNino impact would be much lower than earlier anticipation. This is positive development for Automobile sector, specifically for rural products. We expect continuous improvement in the semiconductor supply helping better PV and EV production ahead. We believe the CV segment would peak out during FY24-mid, while within this segment, M&HCV Bus segment would stage a strong volume with healthy double-digit YoY growth in FY24E. We expect cyclical down turn for M&HCVs and expect double digit decline for the industry in FY25. Overall, we remain constructive on the automobile sector. We expect near term pressure on exports to continue, barring some improvement due to currency devaluation in most exports markets. We have seen positive impact of volume recovery and commodity cost deflation on auto makers' profitability in 4QFY23, while there would be sequential improvement in coming quarters due to lag effect of lower commodity cost benefit and lower energy cost. We believe that gradual price hike, volume recovery and softening commodity prices would improve operating margins in FY24. We remain constructive on tyre sector amid falling raw material prices and likely healthy margins ahead. In case of any major adverse development on 2023 monsoon or climatic condition, which may impact rural economy and automobile consumption going forward, industry performance may get impacted. Therefore, we would monitor the situation closely.


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