TVS, Eicher Motors’ stock ride speeds up after August sales, Tata Motors, Bajaj Auto and Hero Moto skid

Among CV players, Tata Motors saw a 6 percent year-on-year growth in sales for this segment, while Eicher Motors could not even make it to 5 percent growth, and Ashok Leyland saw 51 percent year-on-year growth but on the back of a lower base.

ICICI Securities' analyst Basudeb Banerjee thinks absolute numbers must be looked at instead of percentage terms, and from that perspective, CV numbers seem pretty steady.

Auto analyst Ashwin Patil of LKP Securities too believes that on an overall basis, FY23 should be a good year for CVs because of improving fleet utilisation rates, freight rates, and infrastructure and agricultural demand.

"The second half (of the year) may see some sort of slowdown in this CV sales growth, but overall FY23 should be quite a good year for them," he told CNBC-TV18.

Commenting on tractors specifically, Banerjee said there's been a divergence between retail and wholesale sales between April and July. While retail numbers used to be 11,000-12,000 units a week for the industry, wholesale numbers were far higher, he said.

"So that convergence of wholesale retail through destocking activities during final monsoon months has been taking place in July and August. From a wholesale perspective, September and October are typically very strong for the tractor industry. Year-to-date, the industry is up some 3 percent, in line with the industry guidance," he said.

There was also a sharp fall in two-wheeler exports in August. Bajaj Auto saw 28 percent YoY fall in exports because Nigeria restricted two-wheeler movement. Nigeria retails were down 25-30 percent for Bajaj Auto, which gets 20 percent of its export volumes from the African country.

Bajaj Auto's exports were down 28 percent while Hero MotoCorp saw a 48 percent fall, and TVS Motors saw a 15 percent YoY fall.

However, Patil anticipates this fiscal year to be a joyful year for domestic two-wheelers who have seen demand increase as things return to normalcy from the COVID-19 pandemic.

He expects two-wheelers to report good numbers in FY23 and sees the trend should continue in FY24 as well, with the EV scooters' launch and overall demand coming up with new launches. "The numbers were not that bad as they are portrayed for August. But there were some little bit concerns because of the high base etc. and the exports because of Nigeria otherwise the numbers were good," he said.

ICICI Securities' Banerjee said even Bajaj Auto has been highlighting that export numbers will be a bit tepid in the coming months because of currency challenges, macro challenges, supply chain issues and destocking activities in the target export markets.

According to him, both Bajaj and TVS' domestic numbers were fantastic, which resulted in overall volumes being much better than expected levels.

"So, 400,000 of Bajaj and 335,000 of TVS on an absolute basis were far better than last few months' average levels...Weak exports were expected, and that happened, but strong domestic balanced the weakness in exports, resulting in decent absolute volumes," he said.

Passenger vehicles, meanwhile, witnessed cracker demand, which could be because of new launches, supply side situation easing and a robust order backlog.

Maruti Suzuki’s domestic passenger vehicle sales were up 30 percent year on year, while (M&M) saw a solid 87 percent year-on-year growth in sales, with Tata Motors not too far behind. The latter’s passenger vehicle sales rose 68 percent year on year, and it saw a big jump in electric vehicle sales, with 276 percent year-on-year growth coming in at 3,845 units purely because of the sale of the Tata Nexon.

Banerjee of ICICI Securities pointed out that Maruti's stock has moved up to Rs 9,000 plus levels. According to him, the main driver for the earnings upgrades has been margin outlook improvement, especially with steel, aluminium and now crude also falling towards $90 a barrel. He sees the EBITDA margin outlook moving up from 6-8 percent levels to 12-13 percent levels by FY24.

Volume-wise, he does not think there has been any major trigger to date. Vitara numbers would start coming in from September and October onwards, while more new launches are further expected towards the end of fiscal 2023.

According to him, Brezza sales at 1,65,000 units is nothing extraordinary, the firm has clocked similar numbers earlier as well. "For any major upside led by earnings upgrades, you need positive volume surprises," he said.

On the other hand, the ICICI Securities' analyst believes M&M is performing phenomenally both in terms of volume as well as stock price.

He said the tractor industry itself is not doing that well, so M&M, with some 42 percent market share, is performing in line with the industry.

"But for the stock to deliver further returns from these levels, all eyes should be on the profitability of the auto segment where volumes now are going to cross 30,000 units a with raw material prices falling and operating leverage improving," it said.

Banerjee added that with the initial tranche of Scorpio and new launches getting over, the price hikes are desirable to see the auto segment margin move up and when that happens, the next leg of upgrades should start happening.