LCVs decline YoY; other segments stay healthy: IIFL Capital Services

2 Feb 2023 , 02:43 PM

Analysts at IIFL Capital Services estimate PV industry to have grown 21% YoY. The 2W industry was up 8% YoY, largely in line with retail trends. Tractors grew about 25% YoY on a low base of 33% decline in January-2022. MHCV industry growth was strong at about 26%, but there was moderation in SAAR to about 360k versus average 380k in November-December 2022. LCV was the only major domestic segment to clock YoY decline in volumes (-2%). 

Analysts at IIFL Capital Services expect sharp deceleration in domestic volume growth in FY24 and expect LCVs to be the weakest. Coming to exports, 2W exports saw sharp weakness (-45% YoY), with Bajaj and TVS disappointing by a margin. At the company level, analysts at IIFL Capital Services see downside risk to their FY23 volume estimates for Bajaj/TVS (weak exports) and Hero (2W).

LCV decline YoY; MHCV clocks strong YoY growth but SAAR moderates MoM

In January 2023, MHCV industry grew ~26% YoY. MHCV SAAR moderated from an average of 380k in November-December 2022 to about 360k in January 2023. While SAAR is higher versus FY23 volume forecast (350k, +45% YoY), it would need an improvement for FY24 estimates to be met. Ashok’s market share in January 2023 stood at about 32%, higher than 30% in January 2022. LCV industry declined 2% YoY growth. This is the first YoY decline in LCVs, coming after a strong 33% volume growth in CY2022.

PV volumes bounce-back after year-end de-stocking in December 2022

Analysts at IIFL Capital Services estimate PV industry to be up 21% YoY in January 2023. There was a strong bounce-back from December 2022, as year-end had seen curtailment in production/dispatches. They estimate Maruti’s January 2023 market share at ~41.5%, which is lower than FY22 market share of 43.5%. Tata’s market share stood at 13.5% versus 12% in FY22. M&M’s UV volumes bounced back to 33k (after a weak December), in line with volumes clocked in October-November 2022.

Tractors up about 25% YoY, on an easy base

Tractor industry volumes are up about 25% YoY in January 2023, in line with expectations. This was on a very easy base of 33% decline in January 2022. The YoY base will remain favorable in the coming months (February-March). Hence, headline YoY growth should remain strong in the near-term.

Domestic 2Ws up 8% YoY; 2W exports see a collapse

2W industry volumes grew ~8% YoY in January 2023. This is largely in line with underlying retails. On a YoY basis, Hero and Bajaj seem to have lost market share in overall 2W, while TVS has gained. Coming to 2W exports, there was sharp weakness in volumes (-45% YoY and -20% MoM). While 2W exports have been weak for some time, analysts at IIFL Capital Services believe elections in Nigeria (big 2W export market) may have magnified the impact in January 2023; this may continue in February/March.