Two-wheelers, commercial vehicles and Tractors were above muted expectations, while passenger vehicle were in line with our optimistic estimates, Motilal Oswal institutional Equities has said in a report.
"While Jun'21 was the first month post lifting of the lockdowns by states, demand remains skewed towards passenger vehicles and tractors (higher than Jun'19), with CVs and two wheelers yet to catch up. 2W/M&HCV/LCV volumes fell by 10%/33%/19% CAGR (v/s Jun'19), whereas the same for PV/Tractors grew by 8%/20% CAGR. Based on weak feedback for 2W/M&HCV retails, there seems to be a further inventory build-up in 2Ws," Motilal Oswal Institutional Equities has said in a report.
According to the broking firm, Jun'21 saw a gradual lifting of lockdown restrictions across states, with a good recovery witnessed in PVs and Tractors.
"Current valuations largely factor in a sustained recovery (our base case), leaving a limited margin of safety for any negative surprise. We prefer 4Ws over 2Ws, as PVs are the least impacted segment currently and offer a stable competitive environment. We expect the CV cycle to recover and gain momentum towards 2HFY22. We prefer companies with: a) a higher visibility in terms of a demand recovery, b) a strong competitive positioning, c) margin drivers, and d) Balance Sheet strength. Maruti Suzuki and Mahindra and Mahindra are our top OEM picks. Among Auto Component stocks, we prefer ENDU and Bharat Forge. We prefer Tata Motors as a play on global passenger vehicles," the broking firm has said.