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Following a sharp rally post the RussiaUkraine conflict, prices of most commodities, such as crude, copper, aluminum, steel and palm oil, corrected 17%40% from the top.
Following a sharp rally post the RussiaUkraine conflict, prices of most commodities, such as crude, copper, aluminum, steel and palm oil, corrected 17%40% from the top.
As per HVS Anarock, industry occupancies fell below 50% in Jan’22 owing to Omicron impact before recovering to ~55% in Feb’22 and 61% in Mar’22. This momentum carried forward into Apr’22 with industry level occupancies reaching ~65% (same as Apr’19) pre-Covid levels and Apr’22 RevPAR at Rs3,803 or 103% of Apr’19 levels.
IndiGo sees moderation but seems to have crossed the 55% level structurally as of now beyond tactical ups and downs. In May’22, the market share of Air India/IndiGo shrank 80/40bps MoM to 7.8%/57.9%, while that of SpiceJet/Go First/Air Asia expanded 40/50/30bps MoM to 9.5%/10.6%/5.7%.
Our sector preference is 2Ws > PVs > CVs, largely based on valuation comfort. Within two-wheelers, we have a BUY rating on Hero MotoCorp and TVS Motors. We also like Eicher Motors (ADD). We have a REDUCE rating on Bajaj Auto. We interacted with 22 two-wheeler (2W) dealers' pan-India to get a sense of demand trends in June. One common feedback we got is that 2W demand is picking up QoQ in Q1 and is being driven by: (1) pick-up in rural sales on the back of improved crop prices and (2) opening up of schools and colleges. Also, competitive intensity has eased in the entry 100cc segment with withdrawal of BAL's CT100. The single major beneficiary of both the above factors is Hero MotoCorp, which is seeing a market share revival in many regions pan-India. Both Bajaj and TVS have been hit by supply constraints impacting their 125cc and above portfolios. While TVS' well-diversified mix has helped cushion a part of the impact, BAL seems to be the worst hit as its contribution in 125cc and above segment is much higher than listed peers. For Royal Enfield, with supply constraints having eased considerably, all their models are now available at most dealers with minimal waiting period. As per dealers, RE is preparing for a strong launch pipeline, with a new model launch every quarter, subject to supply availability.
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