Automobiles & Auto Components share price target

Retail sales for the automobile industry as a whole rose 9.6% YoY, but fell 7.7% MoM in June 2023 to 18.6 lakh units. Two-wheeler retails sales were up 6.8% YoY to 13.1 lakh units, while car retail sales increased 4.8% YoY to around 3 lakh units.

All segments of the industry, except tractors and three-wheelers, observed month-on-month fall during this period.

Automobile wholesales of listed companies rose 22.1% YoY and 13.5% MoM to 12.9 lakh units in June. While exports fell 26.9% YoY, they increased by 9% MoM to 2,37,508 units.

Domestic two-wheeler wholesales of listed companies were up 7.3% YoY to 8.9 lakh units and passenger vehicles rose 9.3% YoY to 2.1 lakh units.

MSIL’s total volumes for the month of June 2023 saw a growth of 2.3% YoY to 1,59,418 units (-10.5% MoM). Total Domestic sales grew by 5.8% YoY while they declined by 7.9% MoM. Exports declined by 17.0% YoY/ 25.3% MoM. For the month, YoY growth in sales of Utility vehicles continued to be strong, followed by Mid-sized vehicles. On a YoY basis, Mini, Compact and Vans were impacted.

Auto Monthly Volume June 23

Hero Motocorp (HMCL) has reported volume decline of 10%/16% YoY/MoM at ~437k units in Jun’23. Motorcycle sales volumes decreased 12%/17% YoY/MoM to ~404k units vs scooters, which increased 39%/8% YoY/MoM to ~33k units. Late festive season this year resulted in the company tightening inventory further from 40 days we believe, and should start pushing wholesales from Aug’23 onwards.

Domestic 2W retails in Jun’23 (1.3mn units) were up ~7% YoY though down 12% MoM, post a strong May’23, as culmination of marriage season, decline in e-2W subsidy impacted overall retails. e-2W retails declined to ~45k units in June vs. ~105k units in May as pre-buying inflated numbers last month on account of price hikes driven by partial subsidy removal.

Retail sales for the automobile industry as a whole rose 10.1% YoY in May 2023 to 20.2 lakh units. Two-wheeler retails sales went up 9.3% YoY to 14.9 lakh units, while car retail sales rose 4.3% YoY to around 3 lakh units.

All segments of the industry observed year-on-year gains during this period.

Key Monitorables: Rural Recovery, Pick up in Exports, and Price Realizations Top Picks from the Sector: TVS motors in the 2W segment, Maruti in the PV segment, and Ashok Leyland in the CV segment, Mahindra CIE Automotive Ltd in the Ancillary space.

Automobile wholesales of listed companies rose 22.1% YoY to 14.1 lakh units in May, while exports fell 26.9% YoY to 2,15,190 units.

Domestic two-wheeler wholesales of listed companies were up 27.1% YoY to 10.3 lakh units, and passenger vehicles rose 14.3% YoY to 2.2 lakh units.

Post outperforming benchmark Nifty 50 by ~10% in the past six months, India auto index (Nifty Auto), we believe, has limited upside triggers left from a 6 month perspective. We expect volume growth moderation across PVs, CVs, 2Ws and tractors in FY24 along with benefits of reduction in raw material basket cost (RMB) being fully priced in.