June Auto Sales Preview: PV, CV may report healthy numbers; 2-Wheeler sales likely to disappoint – Brokerages picks these auto stocks as best bet

The overall auto sector’s sales momentum in June is expected to be good, in this the PV (passenger vehicle), CV (commercial vehicle), and Tractor segment may continue to report healthy numbers, despite entering into the off-season cycle (July-August), Choice Institutional Equities said in a report. 

For the two-wheeler (2W) segment, the domestic brokerage expects 2W sales to be weak, led by higher vehicle and fuel costs, cooling-off of marriage-related purchases, plus weak sentiment in the lower-income bracket.  

While the demand remains strong on the PV side due to the preference of personal mobility and new launches by major auto companies, it said and added PV dispatches to be higher month-on-month as the availability of semiconductors situation is improving due to the reopening of China. 

Choice Institutional Equities expects Maruti Suzuki to dispatch 162,000 units (over 1 per cent MoM), M&M automotive 54,000 units (over 0.5 per cent) MoM for the month of June 2022. The waiting period for Maruti’s Ertiga (6-7 months), and M&M’s Thar (7-8 months) and XUV700 (18-24 months). 

In CVs, demand for HCV (Tipper, Dumper, and trailer) remain decent due to improved utilization and profitability of fleet operators, and government spending on infrastructure, the brokerage said. It aaded that demand for Buses started improving led by the reopening of schools and offices. 

Similarly, in ICV and LCV, CNG vehicle is gaining traction supported by e-commerce traction and last-mile delivery solutions, Choice Institutional noted further. 

“In 2W, a few of the top running models is having a waiting period of around 1 month due to chip shortage issue. Hero MotoCorp is managing the supply chain better than its peers,” it said. 

The brokerage expects Hero MotoCorp / TVS / Royal Enfield / Bajaj Auto to witness -2.4/-1/+1.3/-0.3 per cent MoM growth, respectively, in June 2022 dispatches. While the demand for E-2W remains healthy, but a shortage of semiconductors slowing down the sales velocity, it pointed out. 

Auto major companies such as M&M, Hero Moto, TVS, Eicher Motor, Maruti Suzuki, Ashok Leyland and Bajaj Auto are best bet according to Choice Institutional and it maintains a Buy rating.