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MOSL: AUTOMOBILES-Continued demand momentum across segments-Discounts on CVs moderating

Automobiles: Continued demand momentum across segments; Discounts on CVs moderating

 

Our interactions with leading channel partners indicate continued demand momentum across segments. This is supported by festive demand (Gudi Padwa and Chaitra Navratri) in key northern, central and western markets in March 2018.

• CVs: CVs will continue to see healthy wholesales, on high base of last year, as demand continues to outstrip supply. We also note sequential decline in discounts on CVs (1-2% lower) for the second straight month in March 2018 (v/s 10-15% in February 2018).
• PVs: PV retails are healthy, led by MSIL. New Swift bookings are at ~95k units, with average waiting period of ~3.5 months. The waiting period for Baleno/Brezza has declined, with improving supply. MM's retails are growing at 8-10% in rural regions.
• 2Ws: Demand for 100-125cc motorcycles remains robust, with average retails growing more than +15%. HMCL is witnessing strong sales in rural markets. TVSL has raised Star City ES prices by INR500 while BJAUT has slashed Pulsar 150 prices by INR3k.
• 3Ws: Demand for 3Ws is normalizing in Maharashtra (35% of passenger 3W market) after fulfillment of pent-up demand post removal of cap on permit issuance.
• We prefer PVs over 2Ws and CVs due to stronger volume growth and stable competitive environment. Our top picks in Autos are MSIL and MSS among the large caps, and AL and EXID among the midcaps.