MOSL: DIESEL GENSETS-MHP and HHP segments driving growth-Competitive intensity high with resultant pricing pressure

​DIESEL GENSETS: MHP and HHP segments driving growth; Competitive intensity high with resultant pricing pressure

• We interacted with a few diesel genset manufacturers/OEMs to get a sense of the demand environment, competitive intensity and resultant pricing pressures being witnessed across ranges. Our key takeaways:
  

Expect 5-7% volume growth, led by MHP/HHP segments

• ​Post a bottom in FY17, the diesel genset industry is likely to grow at 5-7% in the medium-to-long term. The sector is in mature stage and is starting to see consolidation with 4-5 players likely to remain over the next few years. The 5-7% volume growth in 1HFY18 will be sustained as economic growth starts improving.
  
• Historically, it was power cuts that drove diesel genset volumes; now, it is new infrastructure creation/capex that is driving growth for diesel gensets.
  
• Growth in the LHP segment is subdued. Earlier, volumes in this segment used to grow by 15-20% on high power cuts. With power cuts lower now, volume growth has tapered down. The LHP segment (ex Telecom) should see 4-5% volume growth over the next 3-5 years. Solar power and increasing reliance on batteries for backup power are also impacting demand for LHP diesel gensets.
  
• Over the medium term, demand should grow at a CAGR of 10% in the MHP (375-750kva) segment and 12-15% in the HHP segment.