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Published on 12/06/2019 2:51:33 PM | Source: Reliance Securities Ltd

Auto Sector - Subdued Performance across Segments with YoY Decline By Reliance Securities

Posted in Broking Firm Views - Sector Report| #Auto Sector #Sector Report #Reliance Securities Ltd

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* Domestic auto volume declined by 9% YoY but increased 4% MoM to 20,86,358 units in May’19 due to lower retail demand across segments coupled with inventory correction by few players. Despite de-stocking, inventory continued to remain high due to highly weak retail demand. While all segments reported YoY decline in monthly volume, PV and CV segment witnessed the highest decline of 21% and 10%, respectively. LCV volume declined by 4% YoY on the back of relatively better demand situation, while M&HCV volume fell by 20% YoY. Scooter and motorcycles volume declined by 8% YoY and 5% YoY, respectively. Going forward, we expect slowdown to continue, as rural demand is not picking up due to liquidity crisis in NBFC space and various rural markets impacted by monsoon deficit during the last year. After inventory destocking existing inventory continues to remain at higher-than-normal level for most players. Therefore, few companies also announced production cut recently. this would continue to impact the wholesale dispatches to some extent in 1HFY20, in our view.

* Domestic PVs sales fell by 21% YoY and 3% MoM on account of 26% YoY fall in PC and 27% YoY fall in van sales. While UV volume fell by 6% YoY, MPV volume fell by 27% YoY (+7% MoM). Inventory at the company level witnessed a increase during the month, as production was ~5% higher visà-vis sales.

* M&HCV volume fell by 20% YoY and 2% MoM in May’19. Our channel check indicates that higher downfall in retail sales during the month due to pause on incremental capex investment during the General Elections. The cargo segment witnessed 22% YoY volume fall, while the Bus volume declined by 4% YoY. Further, LCV volume fell by 4% YoY (+2% MoM). Overall CV volume decreased by 10% YoY and remained flat on MoM basis during the month.

* Domestic 3Ws sales declined by 6% YoY (+12% MoM) to 51,650 units. 3W passenger carriers’ volume fell by 6% YoY, while 3W goods carriers’ sales fell by 5% YoY.

* Due to lower retail demand in the rural market and destocking by the players, domestic 2W volume fell by 7% YoY (+5% MoM). Scooter, motorcycle and moped sales declined by 8% (+4% MoM), 5% (+7% MoM) and 29% YoY (-18% MoM), respectively. Marriage season in the North aided 2W sales during the month. 2W production was marginally higher by 0.4% than the sales, which led to inventory built-up at the company level.

* Overall exports remained flat on YoY basis ( -1% MoM) to 3,96,833 units. CV volume sharply fell by 56% YoY (+27% MoM), mainly due to decline of 63% and 49% in M&HCV and LCV volume, respectively. While PV exports remained flat on YoY basis (+5% MoM), 3W sales fell by 15% YoY and 14% MoM. 

 

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