1. Smooth ride for PVs, MHCVs a let-down

Smooth ride for PVs, MHCVs a let-down

In the passenger vehicle segment, Maruti Suzuki reported strong 23.4% y-o-y growth in domestic volumes at 144k units, ahead of our estimate of 129k units.

By: | Published: May 6, 2017 2:58 AM
March suggests there could be further downside risk to estimate of 5% drop in MHCV volumes in FY18

In the passenger vehicle segment, Maruti Suzuki reported strong 23.4% y-o-y growth in domestic volumes at 144k units, ahead of our estimate of 129k units. The sharp rebound in Alto/Wagon R segment, up 22% y-o-y, led to the surprise. Other segments also continued to do well benefitting from the strong waiting period for Brezza, Baleno and Ignis. We factor in 13% growth in FY18 volumes for MSIL, which implies 148k units per month.

A few unlisted players like Hyundai, Toyota also reported healthy growth. Medium- and heavy-commercial vehicle (MHCV) segment industry volumes disappointed despite our expectations building in a sharp drop for the month. Lower production of BS-4 variants and weak demand impacted wholesales. Tata Motors reported 50% drop in MHCV volumes while Eicher Motors (EIM) reported 57% drop.

Thus, we believe there can be further downside risk to our estimate of 5% drop in industry volumes in FY18F if trends remain weak. Given the weak show, we see downside risks to our estimate of 37% drop in Apr-17 volumes for Ashok Leyland and thus maintain Reduce.

In two wheelers, Hero Motocorp reported a 3.5% drop in volumes at 591k, below our forecast of 620k. Royal Enfield reported 60k units, up 25% y-y, in line with estimate. In tractors, Escorts reported healthy 20% growth, which implies a positive read-across for M&M. Overall, MSIL remains our top pick in the sector.

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