Weak auto sales continued in the month of September despite big discounts and offers by the auto player. However, brokerages are feeling the demand may pickup going ahead in the festive season on the back of good monsoon.
Tata Motors reported a 50 percent fall in its domestic sales numbers at 32,376 units, while TVS Motor reported 25 percent fall at 3,15,912 units in September 2019 sales.
Ashok Leyland's September sales fall sharply by 55 percent to 8,780 units, while Mahindra and Mahindra sales dipped 21 percent to 43,343 units, YoY.
Maruti Suzuki India, the country's largest car maker, sold 1.22 lakh units in September 2019, falling 24.4 percent compared to 1.62 lakh units sold in same month last year.
According to ICICIdirect, strong monsoons played a part in healthy tractor volumes. Initial industry commentary suggests the festive season has got off to a decent start. With the bulk of the season yet to play out in October, next month’s data assumes significance.
ICICIdirect maintained buy rating on M&M with an unchanged target price of Rs 660 per share.
With initial signs of a recovery in inquiries, a good festive season will help salvage 2HFY20 volumes and clear BSIV inventory. BSVI transition will keep volumes volatile until 1HFY21, Motilal Oswal said in its report.
We prefer four-wheelers over two-wheelers and commercial vehicles (CVs) as the segment is poised for a faster recovery, faces least impact of BSVI and as the competitive environment is benign. Our top picks in autos are Maruti Suzuki and Motherson Sumi among large caps, and Ashok Leyland and Endurance Technologies among midcaps.
Shabbir Kayyumi of Narnolia Financial Advisors has maintained buy on Hero MotoCorp and Maruti Suzuki with a target price of Rs 3,050 and 7,300 per share respectively with 10-15 percent upside.
According to Shabbir Kayyumi Hero MotoCorp has formed an Inverse Head and Shoulder pattern on the daily chart. The momentum indicator RSI too is above its key 60 mark indicating momentum on its side.
Maruti Suzuki has a Cup and Handle Pattern in the daily chart which is on the verge of breakout. Buy should be initiated around breakout out line of cup and handle pattern, which is Rs 6,600 with a stop loss of Rs 6,200, he added.
Wholesale numbers remained weak across most auto segments in September, said foreign brokerage Jefferies.
Medium and heavy commercial vehicles (MHCVs) saw the sharpest cut of nearly 70 percent while two-wheeler and passenger vehicles were down over 20 percent. The brokerage expects significant cuts to FY20 consensus estimates in Ashok Leyland and Maruti Suzuki.
Kotak Intuitional Equities has maintained a neutral stance on the auto sector as passenger vehicles and two-wheeler industry volumes declined by double digits in September 2019.
It believes that the MHCV industry remained under pressure due to weak freight rates and liquidity constraints, while tractor industry volume revived in September 2019.
It expect the momentum to further pick up going into the festive season led by a good monsoon, excess reservoir levels and stable crop prices.
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