Auto demand in the market is less than PV tractors

Motilal Oswal Financial Services (MoFSL) said in a report that the demand for automobiles in June remained in favor of passenger vehicles (PV) and tractors. According to the report, the sales of commercial vehicles and two-wheelers are yet to pick up.

The gradual lifting of lockdown restrictions across states in June 21 saw a good recovery in PVs and tractors.

Current valuations largely factor in a sustained recovery (our base case), leaving a limited margin of safety for any downside surprises.

According to MOFSL, we prefer 4W s over 2W s, as PVs are currently the least affected segment and provide a stable competitive environment.

We expect the CV cycle to recover and gain momentum towards 2HFY22. We prefer companies with high visibility in terms of demand recovery, a strong competitive position, margin drivers and balance sheet strength.

Further, MOSFSL informed that 2W S, CVS and Tractor were above our tacit expectations while PVS is in line.

Based on weak feedback for 2W or M&HCV Retail, 2W creates another inventory build-up in S.