Auto Stocks Outlook For The Week – 04 To 08.12.2017

Auto Stocks Outlook For The Week – 04 To 08.12.2017

             Equity Cash/Futures/Options Segment 

Stocks of most automobile companies are expected to trade in a narrow range next week as most sales figures for November were largely in line with estimates. Only sales volume of Ashok Leyland Ltd and Maruti Suzuki India Ltd surprised the market on the upside. Other than Ashok Leyland and Maruti Suzuki, all other companies sales figures for November are strong because of a low base due to demonetisation that was announced in the corresponding period last year. The trend of strong on-year growth rate is expected to continue for the next two months owing to a low base. Total sales of Ashok Leyland rose 51% on year to 14,460 units in November, led by robust growth in light, medium and heavy commercial vehicles. We had expected the Chennai-based company to report a 22.2% on-year growth. Commercial vehicle segment has started witnessing a turnaround. In Apr-Jun, medium and heavy commercial vehicles of Ashok Leyland saw a degrowth of 17%, while for Apr-Nov, it now stands at 8%. The country's largest passenger carmaker, Maruti Suzuki India Ltd, reported a 14.1% on-year growth in its total sales at 154,600 units in November, led by strong sales of its compact cars and utility vehicles. In the long term, we remain positive on the sector due to an expected continuity in demand owing to increased government capital spending, nearnormal monsoon over the last two years, benefits from the implementation of seventh pay commission, and new launches. The sector is expected to see a pick-up in tractor sales, passenger vehicles and two-wheelers, while a turnaround has already started in commercial vehicles. This would lead to a double-digit growth rate over a time period of two years ending March 2019.

Source : Cogencis Information Services Ltd.

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