As per a research report released by Emkay Global Financial Services, the auto sales for the month of April 2021 is likely to be impacted by Covid-19-related restrictions/lockdowns across several states. On a sequential basis, the volumes may be lower across segments. As volume numbers are not comparable YoY due to the complete lockdown last year, the comparison is against April 2019 numbers - Tractors and PVs are likely to be higher, while 2-Wheelers and CVs are expected to see a double-digit decline.
PV industry volumes should improve compared to April 2019 levels. Although retails are affected, healthy order book and inventory build-up with dealers have been supporting wholesales. Two-year CAGR for domestic volumes is expected at 43% for Tata Motors and 4% for Maruti Suzuki, while M&M could see a 13% decline.
Tractor industry volumes should also improve from April 19 levels. Despite pressure on retails, channel filling would support wholesales. Two-year CAGR for domestic volumes is expected at 27% for Escorts, while it is negative for M&M at -11% due to a high base.
CV industry volumes are likely to be under pressure, owing to lower freight availability. The checks initiated by Emkay Global Financial Services indicate that transporters are holding back orders till there is clarity on easing of lockdowns. Two-year CAGR for domestic volumes is expected to decline at -10% for EIM-VECV, -14% for Tata Motors, -15% for Ashok Leyland and -15% for M&M.
2-Wheeler industry volumes are expected to be weak, as lockdowns resulted in loss of student demand and subdued festive season. Premium segment demand remains better than that of the entry level segment. Two-year CAGR for domestic volumes is expected at - 11% for Hero Moto Corp Ltd, -13% for Eicher Motors-Royal Enfield, -15% for Bajaj Auto and -17% for TVS Motors.
Near-term demand may remain subdued due to pandemic-related restrictions. However, Emkay Global expect a recovery from Q2FY22 onward. The positive view on the Automobile sector is underpinned by expectations of a strong cyclical upturn, which is expected to last at least three years.
Emkay Global's top picks among OEMs are Tata Motors (TP: Rs375), Ashok Leyland (TP: Rs155), Maruti Suzuki (TP: Rs8,500) and Eicher Motors (TP: Rs3,300). In Ancillaries, they like Bharat Forge (TP: Rs760) and Apollo Tyres (TP: Rs306).
Key downside risks to the calls and estimates: Delay in economic recovery, rising competitive intensity and adverse movement in currency/commodity prices.