FY23 estimates may be met by the auto companies; low visibility on FY24: IIFL Capital Services

3 Jan 2023 , 12:36 PM

December 2022 PV volumes displayed sequential weakness, which was beyond the typical December seasonality. 2W industry grew 12%, which on an easy base of 11% decline in December 2021, was uninspiring. LCV growth has tapered to single-digit. Tractors grew 20%, but came on a base of 27% decline in December 2021. The only segment that surprised positively was MHCV, which grew 40% YoY. MHCV SAAR in December 2022 stood at more than 390k, which when compared to IIFL Capital Services’ estimate of 346k in FY23, leaves room for growth in FY24. At individual company level, analysts at IIFL Capital Services see downside risk to their FY23 volume estimates for Bajaj/TVS (weak exports) and Eicher (2W).

MHCV sales surprise positively; AL sees sharp market-share gains

In December 2022, MHCV industry grew ~40% YoY. MHCV SAAR stood at more than 390k, much higher than IIFL Capital Services’ FY23 volume forecast of 346k (+44%). Ashok Leyland continued to improve market-share with 34% share in November 2022 and December 2022, up from 25% in CY21 and 31% in January-September 2022. LCV industry growth has tapered to 9% YoY. Analysts at IIFL Capital Services are most positive on MHCV and least positive on LCV, among all Auto segments in CY2023.

PV sequential fall worse than expected

Analysts at IIFL Capital Services estimate PV industry volumes to be up 7% YoY in December 2022. They estimate Maruti’s December 2022 market-share at about 41%, which is lower than its FY22 full-year market share of 43.5%. Tata’s market share stood at 14.7% versus 12% in FY22. M&M’s UV volumes came off to ~28k from ~33k in October-November 2022. Yet, this is much higher than the average of 19k in FY22.

Tractors up about 20% YoY, on an easy base

Analysts at IIFL Capital Services estimate tractor industry volumes to be up 20% YoY in December 2022. This was on a very easy base of 27% decline in December 2021. The YoY base will remain favorable in the coming months (January-March). Hence, headline YoY growth should remain strong in the near-term.

2Ws up 12% YoY, but uninspiring in the light of easy YoY base

2W industry volumes grew 12% YoY in December 2022. However, when seen against the easy base of -11% decline in December 2021, it is underwhelming. Festive season demand was decent at Retail level. However, volumes have come off post festive season (partly seasonal). Within the 2W industry, Honda has gained significant share in FY23. Hence, Hero and Bajaj are underperforming the industry. In addition, Bajaj/TVS are hurt by continued weakness in 2W exports. Eicher’s 68k in December is a sharp correction from 82k in September-October. September-October built in initial Hunter-related spike and festive sales, which are now moderating at Retail level.