Maruti can outperform all other auto stocks in the short term: Mihir Jhaveri, Religare Capital Markets

In an interview with ET Now, Mihir Jhaveri, Vice President-Institutional Research, Religare Capital Markets Ltd, shares his outlook for the auto pack. Excerpts:


ET Now: First let us look at the good news and the good news is two wheelers and Maruti.

Mihir Jhaveri: Yes. Two wheelers have done pretty well. This month most of the companies have done well. Even Bajaj Auto has turned into positive territory after seven months of decline. Hero Motors, TVS, all are doing well. Exports are also doing well. We will wait and watch how the numbers pan out in the coming months. That would be the key how the retail pickup happens and how will be the numbers going forward.

As far as Maruti is concerned, again Maruti exports have done pretty well and that is what has taken the growth to 11.7%. Domestic growth remains more or less flat. We believe that that it is being related to some pending orders of last quarter, which has been fulfilled and therefore this month could be a one off. But again for Maruti also the interesting months should be November and December as they may be able to grow in the post festive season. So that would be the key which everybody is watching for.

ET Now: So just sum up what are going to be hits and misses for you this September month?

Mihir Jhaveri: I believe obviously the two-wheeler pack, which we have been favouring on, should continue to do well. Maruti again has been a hit with a positive surprise. So misses clearly in terms of UVs for M&M have been largely in line, but obviously it is de-growing, it is not growing well. But M&M is saved by tractors doing phenomenally well. We will see on the street their tractor numbers will get upgraded from most of the analysts now and CV obviously continues to be a drag. So CVs, Tata Motors, Ashok Leyland continue to do very badly.

ET Now: How much of the dispatch number or how much of the strength in September dispatch numbers is a function of festival push?

Mihir Jhaveri: A majority would be a festival push. Given that the festival season would last for only one month this time round compared to two months last year, so clearly the entire push has been this month which is very much evident in the numbers.

ET Now: Do you think Maruti has really got the business model right and in the short term Maruti could outperform all other auto stocks?

Mihir Jhaveri: Yes, Maruti is gaining market share. Maruti has surprised positively this month, but having said that obviously we will wait for the next quarter or so to pan out given the fact that probably discount levels are at elevated levels. Even the inventory levels are higher. So one needs to see how the retail pickup happens for Maruti. Having said that, obviously they have gained the market share. So they are bucking the trend and they are doing well.

ET Now: Why is Mahindra & Mahindra suffering? Is it only because of increased competition in the UV market?

Mihir Jhaveri: Yes. Basically UV is two fold – one is the competition has increased and also if you see, the excise duty hike has hit them hard. So in this kind of environment where diesel prices and fuel prices are increasing every month and the sentiment is pretty weak in terms of macro environment, the purchases of high ticket vehicles are very low. So that is the reason why M&M is also getting hammered not only from competition but also from the macro environment.

ET Now: What to your mind are the chances that in the month of October and November we could see some degree of disappointment because ahead of festival, the companies have cleared their inventory, but the dealer inventory is reaching an all-time high?

Mihir Jhaveri: Basically October will be the month to see how the numbers pan out because my own sense is that November-December are going to be the very testing months for these players given the fact that their inventory levels are too high.