November 29, 2022

Shares of TVS Motor, Ashok Leyland, and Mahindra and Mahindra (M&M) rose on Friday, September 2, whereas Tata Motors, Maruti, Bajaj Auto and Hero Motocorp declined as August occurred to be a combined bag for the auto sector.

The expansion fee for business automobiles slowed sharply to low single digits final month in comparison with earlier months, two-wheeler exports, too, noticed a steep decline. Nonetheless, the passenger automobiles section noticed sturdy demand.

How auto shares  fared (on September 2) post-August gross sales knowledge was launched
Inventory  Change at shut 
Ashok Leyland 0.65
TVS Motor 1.05
Eicher Motors 0.52
Hero Motocorp -1.69
M&M 0.15
Maruti Suzuki -1.27
Bajaj Auto -0.94
Tata Motors -1.19
Supply: NSE

Industrial automobiles

Amongst CV gamers, Tata Motors noticed a 6 p.c year-on-year development in gross sales for this section, whereas Eicher Motors couldn’t even make it to five p.c development, and Ashok Leyland noticed 51 p.c year-on-year development however on the again of a decrease base.

ICICI Securities’ analyst Basudeb Banerjee thinks absolute numbers have to be checked out as a substitute of share phrases, and from that perspective, CV numbers appear fairly regular.

Auto analyst Ashwin Patil of LKP Securities too believes that on an general foundation, FY23 needs to be an excellent 12 months for CVs due to enhancing fleet utilisation charges, freight charges, and infrastructure and agricultural demand.

“The second half (of the 12 months) may even see some type of slowdown on this CV gross sales development, however general FY23 needs to be fairly an excellent 12 months for them,” he advised CNBC-TV18.

Commenting on tractors particularly, Banerjee mentioned there’s been a divergence between retail and wholesale gross sales between April and July. Whereas retail numbers was 11,000-12,000 models every week for the business, wholesale numbers had been far increased, he mentioned.

“In order that convergence of wholesale retail by way of destocking actions throughout ultimate monsoon months has been happening in July and August. From a wholesale perspective, September and October are usually very robust for the tractor business. Yr-to-date, the business is up some 3 p.c, according to the business steerage,” he mentioned.


There was additionally a pointy fall in two-wheeler exports in August. Bajaj Auto noticed 28 p.c YoY fall in exports as a result of Nigeria restricted two-wheeler motion. Nigeria retails had been down 25-30 p.c for Bajaj Auto, which will get 20 p.c of its export volumes from the African nation.

Bajaj Auto’s exports had been down 28 p.c whereas Hero MotoCorp noticed a 48 p.c fall, and TVS Motors noticed a 15 p.c YoY fall.

Nonetheless, Patil anticipates this fiscal 12 months to be a joyful 12 months for home two-wheelers who’ve seen demand enhance as issues return to normalcy from the COVID-19 pandemic.

He expects two-wheelers to report good numbers in FY23 and sees the development ought to proceed in FY24 as properly, with the EV scooters’ launch and general demand developing with new launches. “The numbers weren’t that dangerous as they’re portrayed for August. However there have been some little bit considerations due to the excessive base and so on. and the exports due to Nigeria in any other case the numbers had been good,” he mentioned.

ICICI Securities’ Banerjee mentioned even Bajaj Auto has been highlighting that export numbers will likely be a bit tepid within the coming months due to forex challenges, macro challenges, provide chain points and destocking actions within the goal export markets.

Based on him, each Bajaj and TVS’ home numbers had been implausible, which resulted in general volumes being significantly better than anticipated ranges.

“So, 400,000 of Bajaj and 335,000 of TVS on an absolute foundation had been much better than previous couple of months’ common ranges…Weak exports had been anticipated, and that occurred, however robust home balanced the weak spot in exports, leading to respectable absolute volumes,” he mentioned.

Passenger automobiles

Passenger automobiles, in the meantime, witnessed cracker demand, which may very well be due to new launches, provide aspect state of affairs easing and a strong order backlog.

Maruti Suzuki’s home passenger car gross sales had been up 30 p.c 12 months on 12 months, whereas (M&M) noticed a stable 87 p.c year-on-year development in gross sales, with Tata Motors not too far behind. The latter’s passenger car gross sales rose 68 p.c 12 months on 12 months, and it noticed a giant leap in electrical car gross sales, with 276 p.c year-on-year development coming in at 3,845 models purely due to the sale of the Tata Nexon.

Banerjee of ICICI Securities identified that Maruti’s inventory has moved as much as Rs 9,000 plus ranges. Based on him, the principle driver for the earnings upgrades has been margin outlook enchancment, particularly with metal, aluminium and now crude additionally falling in direction of $90 a barrel. He sees the EBITDA margin outlook shifting up from 6-8 p.c ranges to 12-13 p.c ranges by FY24.

Quantity-wise, he doesn’t assume there was any main set off so far. Vitara numbers would begin coming in from September and October onwards, whereas extra new launches are additional anticipated in direction of the tip of fiscal 2023.

Based on him, Brezza gross sales at 1,65,000 models is nothing extraordinary, the agency has clocked comparable numbers earlier as properly. “For any main upside led by earnings upgrades, you want optimistic quantity surprises,” he mentioned.

Alternatively, the ICICI Securities’ analyst believes M&M is performing phenomenally each by way of quantity in addition to inventory worth.

He mentioned the tractor business itself is just not doing that properly, so M&M, with some 42 p.c market share, is performing according to the business.

“However for the inventory to ship additional returns from these ranges, all eyes needs to be on the profitability of the auto section the place volumes now are going to cross 30,000 models a with uncooked materials costs falling and working leverage enhancing,” it mentioned.

Banerjee added that with the preliminary tranche of Scorpio and new launches getting over, the value hikes are fascinating to see the auto section margin transfer up and when that occurs, the following leg of upgrades ought to begin occurring.

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