M&M’s Pune plant to attend the TUV 300 launch and were encouraged with features, drivability and pricing of the new vehicle. With right segment customer’s target, we believe the new TUV 300 has the potential to add more than 20 per cent to M&M’s current UV volume run-rate on steady state basis assuming partial cannibalization with Bolero.
We believe the product is an ideal upgrade to semi-urban/rural and entry level customers in urban centres.
We believe the near-term catalysts are likely to play out in the next few quarters:
- UV launches (TUV 300 and CUV/S101) to fill the product gaps.
- Roll-out with petrol engines with S101;
- Partial tractor recovery on a low base;
- Impact of truck business break-even; and
- Jeeto volume ramp-up to about 2,500/month.
We believe the demonstration of margin surprise in 1QFY16 will be followed by volume surprises in coming quarters as new UV model volumes start.
We also expect moderate tractor volume recovery starting 3QFY16 on the low base of last year. Greater visibility on upcoming UV launches and directional change in tractor volume to improve the confidence and stock re-rating is expected to follow.
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