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Automobiles (wholesale) - Wholesales push continues despite modest retail trends - ICICI Securities

Posted On: 2021-03-01 23:34:36 (Time Zone: Arizona, USA)

Two-wheeler (2W): Premium motorcycle, scooters grow ahead of entry segment

- Hero MotoCorp (Hero) has reported sales of ~505k units, up 1% YoY. Motorcycle segment declined 3% YoY while scooter segment grew ~120%. Overall, domestic sales were flat YoY, while exports were up ~17% YoY.

- TVS Motors (TVSM) has reported 18% YoY growth to ~297k units. Domestic sales grew 15% YoY to ~196k units while exports grew 23% at ~102k units. On segmental level, 2W sales grew 21% to ~285k units and 3W sales shrunk 24% YoY to ~13.2k units largely due to lack of public mobility. On a sub-segment basis, motorcycles and scooters grew 16%/58% YoY to 137k/95k units, respectively, while mopeds declined 9% YoY to ~52k units.

- Bajaj Auto (BAL) has reported 6% YoY growth to ~375k units during the month. Domestic sales declined 2% to ~165k units while exports grew 13% YoY to ~210k units. On a segmental level, motorcycles grew 7% YoY to ~333k units due to higher domestic demand for Pulsar-125 and strong export sales up 12% YoY at 184k units. 3Ws declined 5% YoY to ~42k units with domestic sales down 27% at ~16k units.

- Royal Enfield has reported 10% YoY growth to ~70k units with new product launches (e.g. Meteor) likely to drive growth in FY22. Motorcycle sales in 350cc segment grew 12% YoY to ~64k units while >350cc segment fell 15% to ~5.3k units. Exports reported 94% growth to 4.5k units.

- HMSI reported 29% YoY growth with domestic sales up 31% at 412k units while exports were up 16% at 31k units.

Passenger vehicles (PVs): UV space drives growth but more competition as well

- Maruti Suzuki (Maruti) reported ~12% YoY growth at ~164k units. Mini-vehicle segment clocked 13% decline (remains a worry) at ~24k units, while compact segment grew 15% to 80.5k units. UV segment dispatches grew ~19% YoY at ~27k units. Dispatches to Toyota continue to be grow rapidly (up 104%/at 5.5k units), likely due to Brezza variant - Urban Cruiser launch. Domestic sales (ex-commercial & Toyota dispatches) were up 8% YoY at 145k units. LCV dispatches grew 5x. Exports were up 12%.

- Mahindra & Mahindra's (M&M) volumes reported 41% YoY (low-base effect) growth to ~15k units with UV segment growing 44% YoY to 15.4k units. UV segment growth remains below potential, likely due to supply-side issues. New Thar continues to clock healthy growth, remains on multi-month waiting period.

- Tata Motors' Feb'21 volumes were the highest ever sales in the past 9 years with 119% YoY growth at 27.2k units, maintaining its position as the 3rd largest player as its key models like Altroz and Nexon continue to drive growth. The company unveiled its new 7-seater premium SUV under the Safari brand.

Our view: Post the soft start of Jan'21 dispatches, despite the supply-chain issues, OEMs have maintained dispatches to create incremental buffer in the channel for the upcoming marriage season (Apr'21 onwards). However, the increase in product prices in Q1CY21 in the wake of higher input seemingly is keeping consumer sentiment in check (visible in retail demand trends). Faster vaccination could help in improving urban demand for a few segments (e.g. Scooters, 3-Ws).

- Hyundai posted 26% YoY growth in domestic volumes at 51.6k units while exports grew 15% YoY to 10.2k units. The company is witnessing strong sales from the new i20, second-generation Creta and Venue iMT models.

- Kia Motors has reported only 7% YoY growth to ~17k units. The recently launched compact SUV Sonet continues to drive sales momentum, however, new competition in SUV space seems to have slowed the growth momentum.

- MG Motors' recently launched Hector refresh and the recently launched Gloster are growing steadily to reach peak utilisation at 4.2k units (up 208% YoY).

- Toyota's volumes were up 36% YoY to ~14.1k units. Launch of Urban Cruiser compact SUV (rebadged version of Maruti Brezza SUV) in Sep'20 has pumped up sales.

- Honda cars reported 28% YoY growth in domestic sales at 9.3k units.

CVs: M&HCVs witness sequential improvement even as LCVs continue to grow well; rural demand continues to support tractors

- Ashok Leyland's domestic CV volumes were 20% higher YoY to ~12.8k units as M&HCV witnessed 5% improvement YoY to ~7.1k units. Domestic LCVs witnessed strong 46% YoY growth to ~5.6k units. New platform launches in LCV segment is potentially aiding market share expansion for Ashok Leyland. Exports rose ~7% YoY to 927 units.

- Eicher Motors' CV segment volumes grew 19% YoY to 5.5k units.

- Escorts' tractor volumes rose sharply at ~31% YoY growth to 11.2k units. Domestic volumes improved 33% YoY at ~10.7k units while exports stood at 540 units. Volumes were supported by easing supply chain worries as well as strong expectation of a healthy winter crop with increased cashflow for farmers on account of better crop price realisation.

- Mahindra & Mahindra's (M&M) CV segment volumes declined 42% YoY at ~9k units as LCVs <3.5T declined 42% while LCVs >3.5T and M&HCVs declined 51% and 22%, respectively. Volumes in 3W segment dropped 39% to 2,357 units.

Tractor dispatches clocked 25% YoY growth to ~28k units as domestic sales rose 24% to ~27k units. With all-time high rabi acreage, investments in rural development schemes and demand offtake post rabi procurement will be key monitorables in the upcoming rabi season.

- Tata Motors' domestic CV segment volumes grew 21% YoY to ~34k units. M&HCV sales grew ~42% YoY to ~14.4k units. LCV volumes too rose ~9% YoY to 16.8k units. Overall export volumes were up 10% YoY at 2.9k units.

Source: Equity Bulls

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