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Auto demand recovery weaker than expected
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SME Times News Bureau | 05 Sep, 2021
Automobile demand recovery has been weaker than expected post the
lifting of second lockdown in June 2021, said Motilal Oswal Financial
Services Limited (MOFSL).
Accordingly, while PVs (passenger
vehicles) continue to witness healthy recovery, whereas two-wheelers and
CVs (commercial vehicles) are subdued.
"The outlook for tractors is also muted, especially considering the high base of 2HFY21," the report said.
"Additionally,
the semi-conductor shortage is intensifying, with 2QFY22 likely to see
the worst impact. While there is hope that semi-conductor supplies would
improve in 2HFY22, OEMs and vendors are currently living by the day."
Besides, the report pointed out that financing has been getting stringent for CVs and two-wheelers.
"Lastly,
commodity prices seem to be stabilising for now. Coupled with price
increases taken and cost-cutting initiatives, EBITDA margins should
start looking up from 2HFY22."
In terms of sectoral picks, MOFSL
prefers '4Ws' over '2Ws' as 'PVs' is the least impacted segment
currently and offers a stable competitive environment.
"We expect the CV cycle to recover and gain momentum towards 2HFY22."
"In
our estimates, we build in strong recovery in 2HFY22 and beyond, with
FY22 growth at 16 per cent, 28 per cent, 28 per cent, 55 per cent, 4 per
cent for 2W, PV, LCV, M&HCV, Tractors."
"We prefer companies
with higher visibility in terms of demand recovery, a strong
competitive positioning, margin drivers, and balance sheet strength."
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
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64.50 |
UK Pound
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87.50
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84.65 |
Euro
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78.25
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75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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