Auto sales recovery in sight - CSEC Research

- Healthy sales in PV segment: PV segment witnessed strong growth in volumes with Market leader Maruti Suzuki (Maruti) showing 16% YoY growth in overall volumes. Domestic sales for Maruti grew by 14.6% YoY, while exports witnessed robust growth of 33.4% YoY. Compact segment showed growth of 20.9% YoY. Mini segment de-grew by 8.7% YoY while super compact segment grew by 21% YoY. Strong demand for recently launched models helped Maruti post good volumes. Hyundai posted muted growth of 3.4% YoY. Tata motors' car sales declined by 47% YoY, while UV sales de-grew by 23.5% YoY. M&M showed robust growth in PV segment at rate of 22.1% YoY.

- LCV segment on the track of recovery: Tata Motors posted strong growth in both LCVs and M&HCV segment at the rate of 15.1% YoY and 24.6% YoY respectively. Eicher motors showed robust growth of 50.0% YoY. M&M reported robust volumes in CV segment driven by 21% YoY growth in LCV segment. Company's M&HCV segment grew by 86% YoY. Ashok Leyland showed robust growth in M&HCV segment at rate of 32% YoY, while LCV segment grew 27.0% YoY. With all key players in LCV segment posting healthy volumes, LCV segment recovery is now gaining pace.

Industry Outlook going forward: On the back of strong demand outlook, we expect OEMs post healthy volumes in the current fiscal. Lower interest rates and softness in fuel prices would add to the sentiments. Higher consumption spending, growth in service sector and last mile connectivity to boost LCV sales, while increasing mining, industrial and infrastructure activity including the smart city project by Govt to drive M&HCV segment. We also expect PV OEMs to line up new model launches driving the growth in the segment. Key risks are lower rural income and higher NPAs by PSU banks that may limit the growth to some extent.

Source : Equity Bulls

Keywords