Mixed signals from May Auto sales volumes: Angel Broking

Views of Mr. Shrikant Akolkar (Research Analyst- Auto & Auto Ancillary, Angel Broking):

Maruti Suzuki reported 15.5% growth in the domestic sales. In April-2017 UVs grew by 29% however in May, MSIL's UV volumes have again come back to fast growth track with 66% yoy growth. Mini range vehicles reported 18% yoy growth. As already indicated by the company, exports growth has remained lackluster with 36% yoy decline. Overall, with 11% growth in the total volumes, the growth has remained subdued in May. Company already has BSIV compliant models, hence going forward; we expect significant improvement in the volumes.

Ashok Leyland's sales volumes for May declined by 8% on yoy basis. MHCV volumes declined by 18% yoy while LCV volumes grew by 22%. The company had also witnessed decline in volumes in April as well. The drop in the MHCV volumes was owing to the transition from BSIII to BSIV which is likely to last another month. We expect company to report subdued volumes in June as well. With the normal monsoon expectations and pick up in infrastructure activity, this growth however is likely to remain higher in the remainder of the year.

Mahindra and Mahindra's MHCV sales declined by 13% echoing the impact of the transition to BSIV as well as some confusion regarding GST rates. In PV segment, M&M sales grew by 3% while exports declined by 68%.

Hero Motocorp' May numbers were better than our expectations. The company sold 633,884 units in May, 8.7% growth on yoy basis. We do not expect GST hangover on two wheelers and expect strong volume growth going ahead.

Escorts reported a strong 29% volume growth. We expect strong volume growth in tractor segment on the back of the normal monsoon forecast. GST rates are neutral to the tractors hence expect no adverse impact.

Bottomline, the May numbers released so far give mixed signals. Tractors remain bright area while CV numbers remain subdued due to transition to the BSIV standards. PV volumes are likely to improve going forward with strong consumption trends and lower lending rates. Overall we remain optimistic on the automobile sector.

Source : Equity Bulls

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