Auto Sales Update - Urban weakness continues ::Edelweiss

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Demand stayed subdued for cars while tractor sales were affected by the festival related seasonality. Growth of MHCV sales decelerated despite the low base advantage. The silverlining, however, was the steady demand for two wheelers and LCVs which are benefitting from rural demand and good intra-city goods movement respectively. The trend is in-line with our thesis that economic slowdown is likely to affect truck and car demand while the strong farm income should support demand for two wheelers and tractors. Prefer Bajaj Auto and Mahindra & Mahindra over Maruti Suzuki and Ashok Leyland.

Cars: Weakness prevails

Car makers continued to reel under adverse macro outlook and poor demand scenario. Maruti’s sales at 92k were down 19% YoY. Even after adjusting for the production loss and festivity, trailing three months sales are down 11% YoY.

Two wheelers: Buoyancy continues

The performance across companies was generally strong and positive. Hero MotoCorp (HMCL) reported sales of 537k units (up 27% YoY, 5% MoM) whereas TVS reported sales of 173k, up 12% YoY. Moped sales bounced back with 21% YoY growth.  Amongst others, HMSI sales at 199k were up 54% YoY while Yamaha sales at 50k were up 32% YoY. This reaffirms our positive outlook on the two wheeler segment.

Commercial vehicles: LCVs firmly on track, MHCVs decelerate

Tata Motors (TTMT) LCV sales at 28,673 units (up 41% YoY and 31% MoM) have been above expectations due to the cannibilzation from three wheelers and a strong demand for intra-city goods movement . TTMT MHCV sales growth decelerated to 9% YoY at 16,064 units from 23% in Oct despite the favorable base. We expect MHCV sales growth to taper off to low single digit from Dec onwards.

Tractors: Takes a breather

M&M registered sales of 17,527 units, down 3% YoY and 45% MoM. Historically, whenever Diwali falls in October, November experiences more than 40% MoM decline in sales.  Three key festivals including Diwali were bunched up in October which accentuated the fall in November sales. This we believe is an aberration and not trend.