Macquarie:: India automobiles November sales - Holding on to growth

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India automobiles
November sales - Holding on to growth


Event
􀂃 Automobile majors Maruti Suzuki, Tata Motors, Hero Honda, M&M, TVS Motors
and Bajaj Auto reported monthly sales for November 2010. In line with
expectations and the seasonal trend, all recorded MoM declines in sales post
the festive season, although YoY growth rates stayed strong for most of them.


Impact
􀂃 Maruti Suzuki – on par with estimates: Maruti Suzuki (MSIL IN) recorded
total sales of 112k units, 5% lower than the peak in previous month. Domestic
sales grew at a healthy rate of 34% YoY to 102k units. Sales of the key ‘A2’
segment grew by 32% while ‘C’ segment sales increased 77% YoY on the
back of strong demand for its new mini van 'Eeco'.

􀂃 Tata Motors – Utility and commercial vehicles save the show: Total sales
of Tata Motors (TTMT IN) increased by a meagre 1% YoY to ~55k units,
mainly due to a 34% YoY drop in the sales of passenger cars. Nano
contributed significantly to this as its sales dropped 85% YoY to 509 units.
Commercial vehicles continued on their growth track with the key M&HCV
segment recording 18% YoY growth. The utility vehicle segment had the best
growth rate of 40% YoY on good demand for its new crossover SUV, Aria.

􀂃 M&M – decent growth despite plant shutdown: M&M’s (MM IN) auto sales
grew 18% YoY to 26,668 units and its flagship UV business grew by 6% YoY.
Four-wheeled pick-up sales also grew at a healthy rate of 41% on positive
response to Maxximo. Sales for the month were affected by a six-day
maintenance shutdown. Tractor sales grew 43% YoY, boosted by a good
monsoon season and rising rural income.

􀂃 Hero Honda – disappointing set of numbers: Hero Honda (HH IN) was not
able to continue its momentum of the last month where it recorded its highest
sales ever. For the month of November, sales grew by 10% YoY to 421,366
units; however, the MoM decline was greater than expected at 16%.

􀂃 Bajaj Auto – lower exports: Bajaj Auto’s (BJAUT IN) total sales increased by
8% YoY to ~299k units. Domestic sales grew at a healthy rate of 17% YoY
while exports declined by 8% due to logistical constraints. Two-wheeler sales
increased by 9% YoY, whereas the sales of three-wheelers remained flat.

􀂃 TVS Motors – growth story continues: TVS Motors’ (TVSL IN) domestic
sales grew 31% YoY to ~140k units, while exports rose 2% to 14k units. The
company’s sales of motorcycles grew 40% YoY, scooters gained 44% YoY
and mopeds increased by 10% YoY.

Outlook
􀂃 Positive consumer sentiment and rising disposable incomes should benefit
auto sales. Although the higher base and rising interest rates are expected to
dampen growth rates in the fiscal second half. We believe competition will be
a spoil sport for the passenger and two-wheeler segments. The commercial
vehicle industry should see the best growth rates in the next 2-3 years on the
back of growing industrial production and a pick-up in the investment cycle.
We like Tata Motors, Ashok Leyland (AL IN) and M&M in the auto space.