Automobiles & Auto Components share price target

SAIL: Profit outlook restrained; maintain HOLD. Automobiles: Q2FY24 Review Cruising along. Cement: Q2FY24 Review Cost savings lift Q2 margins; volumes to bolster H2

Top Sector Ideas - Auto and Auto Ancillaries - Q2FY24 Review

The automobile industry saw a 7.7% YoY decline in retail sales, but rose by 12.5% MoM in October 2023 to around 21.2 lakh units. Retail sales of two-wheelers were down by 12.6% YoY to 15.1 lakh units, while that of cars fell by 1.4% YoY to 5.3 lakh units.

All segments of the industry observed a MoM rise during this period.

In Sep’23 and Oct’23 combined, average retails for PVs were up ~5% YoY versus flattish 2Ws. Domestic 2W retails in Oct’23 (1.51mn units) were up 15% MoM driven by festive demand, after being range bound at ~1.3mn for the last four months. E-2W retails improved, +17% MoM to ~75k units versus CY23TD’s mean of ~69k units.

Automobile wholesales for listed companies rose 23.3% year-on-year to 17.5 lakh units in October, while exports fell 1.1% year-on-year to 240,986 units.

Domestic two-wheeler wholesales for listed companies were up 26.2% year-on-year to 12.6 lakh units, and passenger vehicle sales rose 19.4% year-on-year to 2.6 lakh units.

Auto Monthly Update - Oct 2023

With disparity in Navratri periods last year in contrast to this year, PV and 2W players reported strong double-digit YoY domestic growth topped with MoM improvement, as wholesales outstripped retails propelled by seasonality. On the flipside, in CVs, volume dipped MoM by ~20% for the leaders – this is alarming.

Is the auto sector revving back to life? A 20% YoY surge in September vehicle sales suggests that India’s auto market is shifting back into high gear. Climbing from 17 million to 21 million units within a year, the sector seems to be recovering from a prolonged slump, but it's not yet back to its 2020 peak of 26 million.

In September 2023, the automobile industry saw a 20.4% YoY increase in retail sales, amounting to 18.8 lakh units. Breaking it down, two-wheeler sales surged by 21.7% YoY, reaching 13.1 lakh units, and car sales grew by 19% YoY, totaling around 3.3 lakh units.

All segments of the industry, except for Tractor OEMs, observed a MoM and YoY rise during this period.