Monthly growth below expectations – In Sep ’10 Hero
Honda’s volume increased 8.1% yoy and 2.1% mom to 433,641
units (below our expectation). YTD growth was 9.5% yoy at
2,519,983 units. On our estimate, residual growth would be
23.9% for 2H FY11.
We expect market share losses – On a quarterly basis,
volume grew 8.7% yoy and 4.2% qoq, much below those of the
other two-wheeler manufacturers. We expect 2Q FY11 to be
one of the worst quarters for Hero Honda in terms of market
share deterioration. (Bajaj Auto and TVS Motor reported volume
growth much higher than Hero Honda’s in Sep ’10 both on yoy
and qoq basis.)
Market dominance, but likely to lose premium over sector –
We expect Hero Honda to maintain its market share dominance
given its brand image, distribution strengths and successful
product/variant launches. Nevertheless, we expect HH to lose
the premium at which it had traded over the sector given that its
volume growth has underperformed the industry and it has
been losing market share. In addition, we expect it to lose
market share in the high-margin executive segment, leading to
product mix deterioration in the coming quarters. We, however,
expect volume growth to be robust in the festival season.
Maintain Underperform.
No comments:
Post a Comment