The top three listed Commercial Vehicle (CV) manufacturers have averaged a sales turnover growth of 15% in the past four years. Robust economic growth in India and lower oil price has assisted this industry to continue manage a growth of 7% in FY16. The industry continues its positive growth in sales in FY17 as well as it expanded by 4.5% during April to November this year. Sales of M&HCVs have increased y-o-y since August 2014 however, however LCV segment is reeling under financing pressures. LCV sales have expanded marginally by 2.5% in FY16 and the trend remains quite volatile in last 4 years. Indian CV industry is organised and consolidated and the top three players command ~78% of the market share . Discounts and significant reduction in sales have adversely affected earnings of OEMs on the other hand.

1. CV industry comprises Medium & Heavy Commercial Vehicles (M&HCV) and Light Commercial Vehicles (LCV)
2. Three listed players in the industry. Refer annexure for industry aggregates

Acuité believes CV segment will continue its positive trend for FY18 as well. Vehicle prices are expected to remain stable and input prices may remain moderate. Improvement in GDP and lifting of mining bans will help OEMs post healthy growth over the medium term.

Source: Acuité Research; Ace Equity

Key Risks & Attributes

• Volatility in raw material (steel, aluminium, rubber and plastic) prices
• Forex fluctuation risk
• Competition intensity
• Changes in duty structures
• Outlook on infrastructure sector