Mumbai,
Maharashtra
According
to a research report by Emkay Global Financial Services, the volume of auto
sales may recover from Q2FY22 due to easing of lockdowns, pent-up demand and
improving macros. The report also says that auto sales for the month of June
2021 are likely to be higher than May 2021 but unlikely to reach normal levels
due to staggered unlocking across states during the month.
The research firm is positive that the automobile sector can expect a strong cyclical upturn, that may last for at least three years. The top picks among OEMs are Tata Motors (TP: Rs410), Ashok Leyland (TP: Rs155) and Eicher Motors (TP: Rs3,180). In Ancillaries, they are Motherson Sumi (TP: Rs325) and Apollo Tyres (TP: Rs290).
Good monsoon and an MSP hike are expected to support the tractor volumes. Lockdowns and severe pandemic impacted the volume performance in May’21, but channel checks indicate there may be a positive growth in Jun’21. Customer sentiments have been supported by enhanced crop procurement by the government, expectations of good monsoon and moderate MSP hikes for Kharif crops. Domestic volumes may grow 23% YoY for M&M and 6% YoY for Escorts. M&M’s growth is likely to be higher due to a favourable base.
The PV (private vehicles) volume is also expected to improve. The PV industry volumes should improve, due to a healthy order-book and lower dealer inventories (2-3 weeks vs. normal level of 4 weeks). The research team compared volumes with Jun’19 numbers. Two-year CAGR for domestic PV volume is estimated to be 31% for Tata Motors and 1% for Maruti Suzuki, while M&M could see a 5% decline.
There may be a decline in Two-wheeler volumes. The 2-Wheeler industry volumes should be subdued as the second wave of pandemic has impacted customer sentiment, especially in the case of business community and low-income categories. Two-year CAGR for domestic volume is expected to be -15% for Eicher Motors-Royal Enfield, -18% for Hero MotoCorp, -19% for Bajaj Auto and -24% for TVS Motors. Although domestic volumes would be under pressure, exports are likely to witness a positive growth due to healthy demand and stable currency in key markets.
The CV (commercial vehicles) volumes are expected to come under pressure. The CV industry volumes should be under pressure due to lower freight availability, which may lead to a postponement of purchase orders by transporters. Two-year CAGR for domestic volumes is likely to be -31% for M&M, -47% for Tata Motors, -48% for Ashok Leyland and -48% for Eicher Motors-Volvo Eicher Commercial Vehicles.
Source:
Emkay Press Release
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