PV, CV strong; 2W OEs disappoint en masse: IIFL Securities

2 Dec 2022 , 01:42 PM

Analysts at IIFL Securities estimate PV industry volumes to have grown 32% YoY, with slight MoM contraction attributable to seasonality. MHCV grew 40% YoY, with SAAR improving to 370k. This is much higher than IIFL Securities’ FY23 estimate of 332k (+38% YoY) and implies that the industry has enough steam to see strong growth in FY24 as well. LCV growth tapered to 6% YoY. Current LCV SAAR of about 600k is in line with IIFL Securities’ FY23 estimate (up 25%). Although 2W industry grew ~15% YoY, it is underwhelming when seen in light of an easy YoY base. Festive season demand was decent at the retail level. However, inventory accumulation due to weak retails in the preceding quarter (July-September) is being corrected now. Tractor growth was healthy at about 10%. Overall, analysts at IIFL Securities believe MHCV and to a lesser extent, Tractors are the only segments that may see further upgrades to their FY23 growth estimates.

CV sales stay strong; Ashok Leyland sees sharp market-share gains

In November 2022, MHCV industry grew 40% YoY. MHCV SAAR stood at ~370k, higher than IIFL Securities’ FY23 volume forecast of 332k (+38%). Ashok Leyland continued to improve market-share with 34% share in November 2022, up from 25% in CY21 and 31% in January-September 2022. LCV growth tapered to 6% YoY. Current LCV SAAR of 600k is in line with IIFL Securities’ FY23 forecast (600k, up 25% YoY).

PV stays strong; slight MoM drop is seasonal

Analysts at IIFL Securities estimate PV industry volumes to be up 32% YoY in November 2022. They estimate Maruti’s November 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% versus 12% in FY22. M&M’s UV volumes came off to ~30k from ~33k in recent months. Yet, this is much higher than the average of 19k in FY22.

Tractors up about 10% YoY, in line with expectations

Analysts at IIFL Securities estimate Tractor industry volumes to be up 10% YoY in November 2022. After declining YoY in July-August, underlying retails seem to have clocked YoY growth in the festive season. As a result, the industry has rebounded with YoY growth in September-November.

2Ws disappoint despite decent festive retails

2W industry growth of ~15% YoY in November 2022 is underwhelming when seen in light of an easy YoY base. Festive season demand was decent at the retail level. However, high inventory due to weak retails in the preceding quarter (July-September) needed correction. While the YoY growth looks decent, analysts at IIFL Securities need to see improvement in absolute volumes from current levels, to achieve FY23 estimates. This is more so in case of Hero and Bajaj. Bajaj/TVS are also hurt by continued weakness in 2W exports. Eicher’s 71k in November is a sharp correction from 82k in preceding months. September-October built in initial Hunter-related spike and festive sales, which are now moderating at the retail level. Eicher’s 2W exports are also moderating.