FY23 ends on a high note for MoTown, despite a mixed bag in March
The month of March was a mixed bag for the auto companies. 2Ws have shown a good improvement yoy, which is aheartening sign. 2W exports have shown a continuous trend of massive decline and a similar story was observed in March as now along with Africa; Latam and South Asia also are gradually drifting into negative territory. On the PV front, apart from M&M, both MSIL and TaMo have posted muted yoy growth. On the CV front, we saw a solid growth in M&HCV segment for both Tata Motors and Ashok Leyland. However, the lower segment of Tata Motors reported stunted growth. Bus segment posted robust performance both yoy and mom for Tata Motors. Ashok Leyland performed strongly though. Tractors segment in the month of March witnessed a strong yoy growth.
Although March was modest, the fiscal ending March 31st 2023 was a solid one for all the segments. Two wheelers were the weakest with higher single digit growth mainly due to higher cost of acquisition and rural growth not moving up as per expectations. This was followed by tractors which performed exceedingly well and surpassed street expectations. Passenger cars grew at a solid rate in domestic markets as the chip shortage issue seems to be resolved up to a great extent. CV sales have been excellent throughout the year and the best performer within the auto pack as all of its underlying parameters seem to be in place.
Company wise performance – Among the PV OEMs, MSIL has posted strong growth of 19% yoy in FY 23. This growth came on the back of the twin launches of new Granda Vitarra and Brezza. Also the easing up of chip shortage led to pent up demand. In March however, we witnessed weakness in sales as they fell 0.3% yoy and 9.3% mom. Small cars in March de-grew by 25% yoy and 47% qoq. The UV segment grew 48% yoy and 10.4% mom on success of the 2 model variants mentioned above. Even the compact segment posted 12.7% dip yoy and 10.1% mom de-growth. In the exports markets however, the company posted a massive recovery both yoy and mom, thus ending the year with a good recovery of 8.8%. TaMo’s PV segment saw a 2.5% mom and 4% yoy growths. M&M’s SUV segment on the other hand, jumped up by 31% yoy and 19% mom on success of its new launches, Thar, the Scorpio and the XUV families. CV division posted a decent growth of 12.3% yoy and 6.9% mom. M&M’s tractor business in the domestic markets expanded by 19.6% yoy and 36.6% mom. Similarly, Escorts Kubota’s domestic tractor sales grew by 1.2% yoy while grew 32.5% mom
In 2W segment Bajaj reported an improvement of 24.7% yoy and 14.3% mom dip for its domestic motorcycles while in exports, motorcycles de-grew by 37% yoy and 14.2% mom. TVS 2W segment reported 5% yoy growth of which motorcycle segment de-grew by 12% yoy and grew by 12% qoq, while scooters supported the sales with a growth of 36%, on higher e-scooter I-Qube sales (15,365 in March 23 v/s 1,799 yoy). Mopeds de-grew by 0.4% yoy and grew by 4.3% mom. For Bajaj, its 3W segment moved up by 103% yoy while de-grew 0.3% mom domestically on a good pick up in 3W sales, mainly by the CNG portfolio and e-3Ws. Exports 3Ws however de-grew by 41.8% yoy and 1.1% mom. Hero Motocorp witnessed a good recovery in sales as they grew by 15.4% yoy 31.7% qoq. Full year sales for TVS grew by 11.2%, while for Hero it was 7.8%.
Our View – We witnessed a softer March for PVs and 2Ws on yoy basis, the sales were strong for MHCVs and tractors. Though March was moderate for 2Ws and PVs, the full year FY 23 has looked promising. 2Ws shall gain strength on low base of last year, EV launches and anticipated solid Rabi crop output. However, impact of expected El Nino needs to be seen on the rural centric segments. CVs shall be growing quite healthy in FY 24 as well. Tractor industry growth also need to be monitored well on expected El Nino setting up in the coming monsoon.
We remain positive on the sector. However, our choice is in the following order – CVs, PVs and 2Ws. Stocks specifically, within the 2Ws, we like Bajaj Auto as we expect bounce back of exports 3-4 months down the line as $ scenario improves in Africa. Also the EV strength gaining from Chetak and upcoming launch of e-3W can be additional positives. TVS too looks good with its dominance in EV scooters and solid performance by its new launches. While on the PV side, we like M&M because of its thrust on rural markets through its leadership in tractors business, prudent capital allocation and a robust growth strategy in UVs, EVs and CVs. We also like MSIL on the PV side. We like Ashok Leyland within CVs as it has a diversified revenue base deriving from LCVs, Defense, MHCVs, exports and spares. Every dip in the stocks mentioned above, shall provide good opportunities for investors to enter into them from medium to long term perspective.
Source – PR Agency