Automatic demand recovery lower than expected after the 2nd lockout: MOFSL
The recovery in auto demand was weaker than expected after the second lockdown was lifted in June 2021, Motilal Oswal Financial Services Limited (MOFSL) said.
Thus, while private vehicles (passenger vehicles) continue to experience a healthy recovery, while two-wheelers and CVs (utility vehicles) are in poor condition.
“The outlook for tractors is also mixed, especially given the high base of 2HFY21,” the report said.
In addition, the semiconductor shortage is intensifying, with 2QFY22 likely to suffer the worst impact. While there is hope that the semiconductor supply will improve with 2HFY22, OEMs and suppliers currently live hand to mouth. “
In addition, the report pointed out that funding has become strict for CVs and two-wheelers.
“Finally, commodity prices appear to be stabilizing for now. Coupled with the price increases taken and cost reduction initiatives, EBITDA margins should start improving from 2HFY22.”
In terms of sectoral choices, MOFSL prefers “4W” to “2W”, because “PV” is currently the least affected segment and offers a stable competitive environment.
“We expect the CV cycle to recover and gain momentum towards 2HFY22.”
“In our estimates, we foresee a strong recovery in 2HFY22 and beyond, with growth for FY22 of 16%, 28%, 28%, 55%, 4% for 2W, PV, LCV, M & HCV, Tractors. “
“We prefer companies with greater visibility in terms of recovery in demand, a strong competitive positioning, margin drivers and a strong balance sheet.”
rv / sn / in
(Only the title and image of this report may have been reworked by Business Standard staff; the rest of the content is automatically generated from a syndicated feed.)