As month-end draws close, analysts expect Tata Motors to clock in strong sales numbers for February 2023 and are anticipating pre-buying of commercial vehicles during the month as car prices are likely to rise from April due to new emission norms.
“Our dealer surveys indicated some pre-buying for CVs as prices are likely to rise by 3-4% from Apr-23 post the implementation of real driving emissions (RDE) norms,” Nomura said in its brokerage note on February 26.
However, it said while there are expectations of further price hikes, it believes the likelihood is low as any further hikes may impact demand. In fact, OEMs may need to step up advertising & promotional spends, as the industry inventory is normalising, it said.
Nomura expects that medium and heavy commercial vehicles (MHCVs) industry volumes are likely to rise by 25 percent in February compared to the same month last year. “Industry demand seems to be on track, and we expect 10 percent y-y growth in FY24F. For Feb23, we estimate Ashok Leyland to gain market share in MHCVs. We expect volumes of Ashok Leyland/Tata Motors to be up 34 percent/17 percent y-y.”
The brokerage added that rural incomes will be impacted in case of weaker monsoons and therefore impact entry segment cars, two wheelers and tractors demand, thus impacting Maruti Suzuki, Hero MotoCorp and M&M the most.
Meanwhile, JPMorgan, which has a neutral rating on Tata Motors with a target price of Rs 415 per share, expects JLR retails to outperform and believes rising industry discounts are key to monitor.
It pointed out that the monthly sales tracker for JLR indicates January 2023 retails grew 8 percent on a YoY basis. It added that it tracks monthly retail sales releases of various end markets that account for 85-90 percent of JLR’s volumes.
JPMorgan said that for JLR it remains key to ramp up quarterly volumes to one lakh and generate close to 1 billion pounds in free cash flow to resume deleveraging journey.
Tata Motors’s shares were trading more than two percent lower at Rs 417.75 on BSE at 10:11 am, amid an overall negative trend in the stock market.
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