Result Update: SECTOR UPDATE: Auto - Kotak

For the month of May 2017, overall sales performance of the automobile manufacturer's was positive, except for the medium and heavy commercial vehicle (MHCV) segment. In the two wheeler segment, demand is back to normalcy and is expected to be stay healthy in FY18. Passenger car sales in May 2017 are expected to grow in high single digit to low double digit. Tractor sales demand remained buoyant on positive outlook for monsoons. MHCV performance remained weak with companies reporting high de-growth. We expect MHCV demand in the near term to remain weak on subdued demand, BSIV production ramp-up and demand uncertainty during GST transition. Expectation of normal monsoon will be positive for two wheeler, passenger car and tractor demand Growth in MHCV is expected to pick-up in 2HFY18. Overall demand in auto segment could witness temporary disruption in demand during GST transition. We like Tata Motors (BUY rating, TP Rs539) in the auto OEM space.

Source : Equity Bulls

Keywords