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Automakers posted record sales in October 2010 on account of the festival
season, with yet another month of double-digit growth. Domestic demand
remained upbeat leading into the festival season, with strong growth seen across
all the segments. All two and four-wheeler majors continued to maintain strong
sales momentum during the month, largely aided by healthy economic growth,
positive consumer sentiment and easy financing. Further, the stocking
by dealers in the pre-festive season helped to post higher volumes during October
2010. Demand for vehicles continued to surpass supply; this is despite the fact
that most auto majors hiked prices, passing on the cost impact to consumers,
owing to high commodity prices and changes in emission norms.
Tata Motors (TML) reported 21.3% yoy growth in total volumes, with the
passenger vehicles (PV) segment growing by 22.8% yoy, while the commercial
vehicles (CV) segment grew by 20.3% yoy during the month. Growth in the PV
segment was driven by a 20.7% yoy increase in the cars category, with Indigo
range leading the pack yet again. Nano volumes declined yet again on mom
basis, down 44.5%. In the CV space, the light commercial vehicles (LCV) segment
grew by 20.9% yoy. Exports continued to report impressive performance,
up 108.6% yoy.
Maruti Suzuki (Maruti) reported impressive numbers, which came in ahead of our
estimates. The company reported the highest-ever monthly sales during October
growing 10% mom. October volumes grew 39.2% yoy to 118,908 units (85,415),
led by 50.3% yoy growth in the domestic market at 107,555 units. The company
crossed the one-lakh mark in domestic sales for the first time. Maruti continued its
growth momentum in the A2, A3 and C segments, registering 50.7%, 32% and
91.8% growth, respectively, in October 2010.
Mahindra & Mahindra (M&M) reported strong growth of 32.3% yoy in total sales
to 58,776 units (44,442), aided by 34.4% yoy growth in the automotive segment
and 29.3% yoy growth in the farm equipment segment. The four-wheeler pick-up
segment grew substantially by 53.3%% yoy, led by strong performance from GIO
and Maxximo vehicles. The UV segment grew by 21.3% yoy, led by Scorpio,
Bolero and Xylo. Logan sales witnessed a revival and grew substantially by
169.1%, albeit on a low base. Domestic tractor sales grew by 31.4% yoy. The
supply constraints on the UV and tractor front also eased out to a certain extent
during the month.
Two and three-wheelers: Bajaj Auto (BAL) posted strong 32.2% yoy growth in total
sales, with motorcycle sales registering a record number. Pulsar posted the
highest-ever sales during the month at 94,598 units. Hero Honda (HH) led the
two-wheeler pack, reporting robust 42.7% growth in sales volume, led by
refreshed product range and new launches. TVS Motor (TVS) maintained its
impressive performance, growing by 38.2% yoy, led by robust growth in all the
segments of the two and three-wheeler market. Motorcycle sales increased by
49.2% yoy and scooter sales grew by 57.8% yoy during the month.
Tata Motors
�� TML registered 21.3% yoy growth in total sales to 64,757 units (53,404).
�� The CV segment recorded 20.3% yoy growth, aided by the M&HCV and LCV
segments, which registered yoy growth of 19.4% and 20.9%, respectively.
�� The PV segment reported 22.8% yoy growth, with Indigo dispatches of 8,292
units, up 69.3% yoy.
�� Nano posted a 44.5% mom decline in sales at 3,065 units.
�� The Sumo/Safari/Xenon XT range reported sales of 3,389 units, up 38.1% yoy.
Maruti Suzuki
�� Maruti registered sales growth of 39.2% yoy to 118,908 units (85,415), with
record numbers in all the large volume segments.
�� The company registered a 50.3% yoy increase in domestic sales volumes,
while exports declined by 18.1% yoy. Maruti continues to focus on meeting the
increasing domestic demand.
�� The A2 segment grew by 50.7% yoy. Sales of the C segment increased
substantially by 91.8% yoy on the back of encouraging numbers from Eeco.
The A3 segment posted healthy growth of 32%, led by strong performance
from DZire.
�� Sales in the B segment grew by 151.2% yoy.
Mahindra & Mahindra
�� M&M’s monthly sales grew by robust 32.3% yoy to 58,776 units (44,442).
�� The tractor segment grew by strong 29.3% yoy, with domestic tractor sales up
by 31.4% yoy. On mom basis, domestic tractor sales grew by 43.4% during
October 2010.
�� The automotive segment grew substantially by 34.4% yoy, led by strong
growth across all segments. Logan sales continued to revive, growing at a
strong rate of 169.1% yoy, albeit on a low base.
�� The UV segment (Scorpio, Xylo and Bolero) reported 21.3% yoy growth.
�� The four-wheeler pick-up segment increased by 53.3%, with Maxximo and
GIO posting strong numbers.
Bajaj Auto
�� Bajaj Auto reported overall sales growth of 32.2% yoy to 370,816 units
(280,455).
�� The motorcycle segment posted the highest-ever sales for the month,
registering 32.1% yoy growth. Pulsar registered record sales of 94,598 units.
�� The three-wheeler segment reported 34.6% yoy growth to 41,040 units
(30,481 units).
�� Exports continued to post strong performance, with robust demand from
Sri Lanka, Colombia, Bangladesh and Africa.
Hero Honda
�� Hero Honda (HH) sold 505,553 units (354,156) during the month, registering
robust growth of 42.7% yoy.
�� Strong performance was driven by refreshed product range, innovative
branding and marketing initiatives, particularly revolving around the
Commonwealth Games.
�� New Super Splendor and Splendor Pro launched in September 2010 also
helped the company to post better volumes.
TVS Motor
�� TVS Motor reported 38.2% yoy growth in overall volumes to 182,341 units
(131,941).
�� Domestic sales grew by 37.5% yoy to 164,290 units (119,475), while exports
continued to report impressive growth of 44.8% to 18,051 units (12,466).
�� The scooter segment recorded 57.8% yoy growth to 44,659 units (28,301).
�� The motorcycle segment grew by strong 49.2% yoy to 84,233 units (56,465).
�� Three-wheeler sales grew by 278.2%, registering sales of 3,449 units (912).
Outlook
We remain positive on the Indian auto sector. We estimate overall auto volumes to
register a ~13% CAGR over FY2010–12E, aided by the improved business
environment for the sector. Over the long term, comparatively low penetration
levels, a healthy economic environment and favourable demographics supported
by higher per-capita income levels are likely to help auto companies in sustaining
their top-line growth. However, increased input costs and interest rates are the
anticipated headwinds that could affect the sector’s volume and earnings growth.
We expect rising input costs to restrict profitability, despite having a positive view
on demand. We prefer stocks where strong and improving fundamentals could
deliver positive earnings surprises. We maintain our positive stand on M&M, Maruti
and Bajaj Auto.
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