Auto demand recovery weaker than expected post 2nd lockdown: MOFSL
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.”
–IANS
rv/sn/in
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
