Automobiles & Auto Components share price target

Retail sales for the automobile industry as a whole declined by 4% YoY to 17.2 lakh units in April 2023. Two-wheeler retail sales went down 7.3% YoY to 12.3 lakh units, while car retail sales dropped marginally by 1.3% YoY to 2.8 lakh units.

On a year-on-year basis, losses were seen across the two-wheeler and passenger vehicle segments, while the other segments saw growth in sales.

Automobile wholesales of listed companies rose 17.7% YoY to 12.4 lakh units in April, while exports fell 38.5% YoY to 1,97,384 units.

Domestic two-wheeler wholesales of listed companies went up 19.8% YoY to 8.7 lakh units, while that of passenger vehicles increased 17.7% YoY to 2.2 lakh units.

Domestic 2W retails in Apr’23 (1.23mn units) were down ~7% YoY as festivities (Navratri) was in March this year vs in April in CY22. Other than this factor, we do not see much deviation in the trend of gradual recovery in overall domestic 2W retails, including rural.

Hero Motocorp (HMCL) has reported a decline of 5%/24% YoY/MoM at ~396k units. Motorcycle sales volume decreased 6%/24% YoY/MoM at ~369k units vs scooters, which increased 5% YoY (although lower 18% MoM) at ~27k units.

PV revenue growth likely to remain strong in Q4 at ~20% YoY for our coverage but margin pressure set to continue

We recently interacted with a large Bihar-based Maruti and Honda 2W dealer, to get a ground-level understanding of both urban and rural markets. Key takeaways: 1) the dealer is expecting FY24 PV and 2W growth at 8-10% and ~12- 15% respectively.

We recently interacted with a number of commercial vehicle (CV) dealers in Gujarat and Rajasthan to grasp the demand outlook. Key takeaways: a) Feb’23 and Mar’23 retail volumes included ~20-30% impact of pre-buying before the 4-5% RDE-related price hikes anticipated to be effective from Apr’23;