Only a few companies have reported September 2017 volumes thus far. Volumes in the festive season have been largely good, as highlighted in our preview note.
Only a few companies have reported September 2017 volumes thus far. Volumes in the festive season have been largely good, as highlighted in our preview note. We summarise our findings and will publish a more detailed note after most companies report their numbers.
In the passenger vehicle segment, Maruti Suzuki (MSIL IN, Buy) reported 10% y-o-y growth in domestic volumes at 151.4k units, in line with our estimate. The Navratra festival saw an 18%-20% increase in bookings, as per media reports. The Baleno/Brezza have a waiting period of 19-20 weeks, and the company is adding a second shift in Gujarat from October to lower waiting times. Overall volumes for MSIL at 163k units were up 9.3% y-o-y. Given the strong traction, there could be upside to our implied run-rate of 148k units per month. Among unlisted subsidiaries, Hyundai/Honda/VW reported strong 17%-21% growth while Toyota was up 2% y-o-y.
In the medium and heavy commercial vehicle (MHCV) segment, VECV (EIM IN) reported strong 27% y-o-y growth to 3.9k units, while Tata Motors (TTMT IN) reported ~21% jump in MHCV volumes at 15.4k units, slightly ahead of our estimate of 15k. TTMT management indicated that infrastructure development led by government funding and restrictions on overloading benefited demand, especially for higher tonnage vehicles.
This is in line with our view of healthy growth in MHCV segment led by overloading restriction despite slower economic growth. We have factored in 15/10% growth in the MHCV segment in FY19/20F. Also, as per the industry body, IFTRT, truck rentals shot up 11-12% on trunk routes in Sep-17, led by festive season inventory build-up and the rush to beat the E-way bill introduction from Oct-17. This corroborates our thesis that E-way should make overloading difficult and sustain truck demand.
In two wheelers, Royal Enfield reported 70.4k units, up 22% y-y, in line with our estimate. Bajaj Auto (BJAUT IN) reported good numbers across segments: domestic 2W at 247k (up 7%), domestic 3W at 34.3k (up 37%) and exports at 147k (up 21%). Overall, we maintain MSIL as our top pick in the sector, and we like Ashok Leyland (AL IN) due to the recovery in the MHCV segment.