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MOSL: Morning India (9/July/19): 1. Automobiles (BS6 conundrum: OEMs need to do a balancing act); 2. Titan Company; 3. Lemon Tree Hotels; 4. Delta Corp; 5. Metals Weekly

MOrning India (9/July/19): 1. Automobiles (BS6 conundrum: OEMs need to do a balancing act); 2. Titan Company; 3. Lemon Tree Hotels; 4. Delta Corp; 5. Metals Weekly

 

Today’s top research theme

BS6 conundrum: OEMs need to do a balancing act; MSIL/EIM least impacted, can potentially benefit from product actions

• The upcoming BS6 transition is unique in many ways, making it even more difficult for OEMs (to strategize) and investors to draw any inference from the past. Moreover, this is for the first time that (a) cost inflation is very high and (b) the implementation is happening simultaneously across auto segments (unlike staggered in the past).
• Hence, OEMs will need to do a balancing act to minimize (a) risk of market share loss (if transited too early), (b) risk of loss on inventory (if transited too late) and (c) margin impact (due to discounts to clear inventory).
• OEMs are indicating benefit of pre-buy to reflect in wholesales in 2Q/3QFY20, while retails pre-buy would reflect in 3Q/4QFY20.
• We expect PVs to be least impacted during the BS6 transition due to the limited cost increase for petrol PVs (~70% of industry volumes) and the scope in alternative fuels. On the other hand, 2Ws/CVs would be most impacted by very high cost inflation.

Piping hot news

Net inflows in equity MFs surge 54.4% month-on-month in June

Mutual fund investors pumped ₹7,675.36 crore into equity schemes in June, up 54.5% from the previous month, the Association of Mutual Funds in India (Amfi) said. However, the amount was still 20% lower than June 2018’s inflows of ₹9,660 crore. Political stability, lower inflation and hopes of earnings growth thanks to the central bank’s stance on lower interest rates fuelled retail inflows, Amfi said in a statement on Monday.