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Automobile Sector
Buoyant volumes on pre-Budget buying
Automakers extended their robust performance into February 2011 as well with
domestic demand remaining buoyant on the back of positive consumer sentiment.
Pre-budget buying to avoid the likely increase of excise duty in the Union Budget
2011-12 was also partially responsible for the strong performance during the
month. Among the majors, Mahindra & Mahindra (M&M), Hero Honda (HH) and
TVS Motor (TVS) reported better-than-expected volumes for February. Overall,
growth momentum in sales was maintained. Going ahead, however, the recent
product price, increase in the fuel price along with higher interest rates would be
some of the headwinds that could impact performance of the players.
Tata Motors (TML) reported 11.7% yoy growth (2.8% mom) in volumes in
February 2011, led by the 16.3% yoy growth (5% mom) in passenger vehicles (PV)
and modest 8.6% yoy growth (1.3% mom) in the commercial vehicles (CV)
segments. In the PV segment, the company reported total off-take of 32,169
units, driven by the 101.3% yoy (23.3% mom) increase in Nano volumes and
21.6% yoy (6% mom) increase in Indigo volumes. In the CV space, total volumes
stood at 45,374 units, with the M&HCV and LCV segments registering 3.8% and
12.4% yoy growth, respectively.
Maruti Suzuki (Maruti) reported robust and in-line sales for February 2011,
clocking volume growth of 15.5% yoy (1.7% mom) to 111,645 units, led by strong
momentum in the domestic markets. During the month, domestic volumes
increased 19.8% yoy (1.1% mom) to 101,543 units. Exports, on the other hand,
continued the downward trend, posting 15% yoy decline to 10,102 units. Maruti
maintained strong volume momentum in the A2, A3 and C segments, posting
19.4%, 27.0% and 26.9% yoy growth respectively, in February 2011. During the
month, the company also launched Kizashi, a luxury sedan in the A4 segment.
M&M registered strong volume growth of 25.4% yoy (down 8.4% mom) to 52,419
units in February 2011, aided by the robust 36.8% yoy growth in tractor sales
(19,041 units) and 19.7% yoy growth in automotive sales (33,378 units). Within
the automotive segment, the four-wheeler pick-up segment grew 13.4% yoy on
the back of strong performance by GIO and Maxximo. Logan sales continued its
upward momentum, registering 114.3% yoy growth. The three-wheeler segment
registered 57.2% yoy growth. Tractors reported a strong 38% yoy (down 6.7%
mom) increase in domestic sales volumes to 18,134 units, while exports volumes
increased 16.3% yoy.
Two- and three-wheelers: Bajaj Auto (BAL) reported 21.7% yoy growth (4.2%
mom) in line with our estimates, with motorcycle sales registering a growth of
22.2% yoy and three-wheeler sales posting better-than-expected 18.4% yoy
growth on the back of easing capacity constraints. HH registered a slightly
better-than-expected 23.5% yoy growth (1.2% mom) in sales to 472,055 units, led
by a refreshed product range and new vehicle launches. TVS reported marginally
better-than-expected 24.3% yoy sales growth (7.4% mom) led by an impressive
49.3% yoy growth in scooter sales and 22.5% yoy growth in moped sales.
Tata Motors
TML reported 11.7% yoy (2.8% mom) growth in total sales to 77,543 units, led
by 16.3% yoy growth in the PV segment.
The CV segment reported a modest 8.6% yoy growth (1.3% mom) aided by
the 3.8% (3% mom) and 12.4% yoy (0.1% mom) growth in the M&HCV and
LCV segments, respectively.
The PV segment posted 16.3%% yoy growth (5% mom) during February 2011,
recording its highest sales for the current fiscal.
PV volumes were driven by the 101% yoy increase (23.3% mom) in Nano
volumes to 8,262 units.
Indica volumes posted 12.7% yoy decline (5.2% mom), while the Indigo range
of vehicles reported 21.6% yoy (6% mom) growth in sales during the month.
TML introduced a new version of Manza equipped with 90PS Safire petrol and
Quadrajet diesel engines in February. Ex-showroom, Delhi, the petrol range
has been priced at `5.14lakh, while the diesel range would cost `5.91lakh.
Maruti
Maruti reported in-line 15.5% yoy (1.7% mom) increase in total volumes for
February 2011 to 111,645 units led by strong momentum in the domestic
markets.
Domestic volumes increased 19.8% yoy (1.1% mom) selling 101,543 units,
while exports continued the downward trend posting 15% yoy decline to
10,102 units.
Growth in the domestic markets was backed by continued volume momentum
in the A2, A3 and C segments, which posted 19.4% (down 0.5% mom), 27.0%
(9.2% mom) and 26.9% yoy (down 2.9% mom) growth, respectively.
Maruti forayed into the A4 segment during the month with the launch of
Kizashi, a luxury sedan. It also launched a diesel version of its popular sedan,
SX4 during the month.
Mahindra & Mahindra
M&M reported strong volume growth of 25.4% yoy (down 8.4% mom) to
52,419 units for February 2011.
The tractor segment grew by a robust 36.8% yoy (down 7.1% mom), with
domestic tractor sales surging 38% yoy (down 6.7% mom). Tractor exports
registered a healthy 16.3% yoy growth as it continues to benefit from the
easing supply constraints.
The automotive segment grew by 19.7% yoy (down 9.1% mom) to 33,378
units. Within the automotive segment, four-wheeler pick-up sales grew by
13.4% yoy on the back of the strong performance registered by the GIO and
Maxximo range of vehicles. Logan sales also maintained the strong growth
momentum, posting 114.3% yoy growth, while three-wheeler sales jumped
57.2% yoy. Automotive exports registered muted 7.4% yoy growth during
February 2011.
During the month, Ssangyong Motor Co. launched the long-awaited new
sports utility vehicle (SUV), Korando C, in an attempt to get back on track and
become a global leader in SUV’s. This is its first new vehicle launch since
2008.
Management has indicated to launch 8-10 new products across segments by
March 2012.
Bajaj Auto
BAL reported an in-line volume growth of 21.7% yoy (4.2% mom) to 326,874
units, with better-than-expected numbers on the three-wheeler front.
The motorcycle segment posted 22.2% yoy (4% mom) growth during February
2011 with Pulsar and Discover accounting for ~67% of the overall motorcycle
sales. Management has guided two-wheeler volumes of 300,000 units in
March 2011.
The three-wheeler segment recorded better-than-expected 18.4% yoy growth
(5.9% mom) to 40,217 units on account of easing capacity constraints.
Exports grew 31.9% yoy to 102,433 units.
Going forward, with the addition of 130 new dealers from April 2011,
management expects the two-wheeler monthly run-rate to increase to
~350,000 units.
BAL launched a new version of the Discover 100 during the month.
Hero Honda
HH reported a marginally better-than-expected 23.5% yoy (1.2% mom) growth
in sales volume to 472,055 units led by strong performance across all the
product segments.
A refreshed product range, new product launches, innovative branding and
marketing initiatives continued to drive the company’s performance on the
volume front. The new Super Splendor and Splendor Pro launched in
September 2010 also helped the company in posting better volumes.
Pleasure is now clocking a monthly run-rate of ~30,000 units.
TVS Motor
TVS reported slightly better-than-expected 24.3% yoy (7.4% mom) growth in
total volumes to 177,412 units led by growth across all its segments and
backed by strong contribution from domestic sales.
Overall two-wheeler volumes jumped 23.2% yoy (7.1% mom), owing to an
impressive 49.3% yoy (down 1% mom) growth in scooter sales to 40,335 units
and 12.7% yoy (5.5% mom) growth in motorcycle sales to 71,462 units.
While Jive is clocking monthly volumes of ~4,000 units, Wego’s monthly
run-rate is ~14,000 units.
Three-wheeler sales continued its growth momentum and registered a strong
97.6% yoy jump in volumes to 4,212 units in February 2011.
On the exports front, volumes increased 25.6% yoy (23.3% mom) to
24,036 units.
Outlook
We remain positive on the Indian auto sector. Overall, we estimate auto volumes
to register ~13% CAGR over FY2010-12 aided by an 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 the auto players in sustaining
their top-line growth. However, higher input costs and rising 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 being positive on the
demand scenario. We prefer stocks where strong and improving fundamentals
could deliver positive earnings surprises. We continue to prefer companies in the
four-wheeler space over companies in the two-wheeler space, considering
reasonable valuations and volume growth visibility.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Automobile Sector
Buoyant volumes on pre-Budget buying
Automakers extended their robust performance into February 2011 as well with
domestic demand remaining buoyant on the back of positive consumer sentiment.
Pre-budget buying to avoid the likely increase of excise duty in the Union Budget
2011-12 was also partially responsible for the strong performance during the
month. Among the majors, Mahindra & Mahindra (M&M), Hero Honda (HH) and
TVS Motor (TVS) reported better-than-expected volumes for February. Overall,
growth momentum in sales was maintained. Going ahead, however, the recent
product price, increase in the fuel price along with higher interest rates would be
some of the headwinds that could impact performance of the players.
Tata Motors (TML) reported 11.7% yoy growth (2.8% mom) in volumes in
February 2011, led by the 16.3% yoy growth (5% mom) in passenger vehicles (PV)
and modest 8.6% yoy growth (1.3% mom) in the commercial vehicles (CV)
segments. In the PV segment, the company reported total off-take of 32,169
units, driven by the 101.3% yoy (23.3% mom) increase in Nano volumes and
21.6% yoy (6% mom) increase in Indigo volumes. In the CV space, total volumes
stood at 45,374 units, with the M&HCV and LCV segments registering 3.8% and
12.4% yoy growth, respectively.
Maruti Suzuki (Maruti) reported robust and in-line sales for February 2011,
clocking volume growth of 15.5% yoy (1.7% mom) to 111,645 units, led by strong
momentum in the domestic markets. During the month, domestic volumes
increased 19.8% yoy (1.1% mom) to 101,543 units. Exports, on the other hand,
continued the downward trend, posting 15% yoy decline to 10,102 units. Maruti
maintained strong volume momentum in the A2, A3 and C segments, posting
19.4%, 27.0% and 26.9% yoy growth respectively, in February 2011. During the
month, the company also launched Kizashi, a luxury sedan in the A4 segment.
M&M registered strong volume growth of 25.4% yoy (down 8.4% mom) to 52,419
units in February 2011, aided by the robust 36.8% yoy growth in tractor sales
(19,041 units) and 19.7% yoy growth in automotive sales (33,378 units). Within
the automotive segment, the four-wheeler pick-up segment grew 13.4% yoy on
the back of strong performance by GIO and Maxximo. Logan sales continued its
upward momentum, registering 114.3% yoy growth. The three-wheeler segment
registered 57.2% yoy growth. Tractors reported a strong 38% yoy (down 6.7%
mom) increase in domestic sales volumes to 18,134 units, while exports volumes
increased 16.3% yoy.
Two- and three-wheelers: Bajaj Auto (BAL) reported 21.7% yoy growth (4.2%
mom) in line with our estimates, with motorcycle sales registering a growth of
22.2% yoy and three-wheeler sales posting better-than-expected 18.4% yoy
growth on the back of easing capacity constraints. HH registered a slightly
better-than-expected 23.5% yoy growth (1.2% mom) in sales to 472,055 units, led
by a refreshed product range and new vehicle launches. TVS reported marginally
better-than-expected 24.3% yoy sales growth (7.4% mom) led by an impressive
49.3% yoy growth in scooter sales and 22.5% yoy growth in moped sales.
Tata Motors
TML reported 11.7% yoy (2.8% mom) growth in total sales to 77,543 units, led
by 16.3% yoy growth in the PV segment.
The CV segment reported a modest 8.6% yoy growth (1.3% mom) aided by
the 3.8% (3% mom) and 12.4% yoy (0.1% mom) growth in the M&HCV and
LCV segments, respectively.
The PV segment posted 16.3%% yoy growth (5% mom) during February 2011,
recording its highest sales for the current fiscal.
PV volumes were driven by the 101% yoy increase (23.3% mom) in Nano
volumes to 8,262 units.
Indica volumes posted 12.7% yoy decline (5.2% mom), while the Indigo range
of vehicles reported 21.6% yoy (6% mom) growth in sales during the month.
TML introduced a new version of Manza equipped with 90PS Safire petrol and
Quadrajet diesel engines in February. Ex-showroom, Delhi, the petrol range
has been priced at `5.14lakh, while the diesel range would cost `5.91lakh.
Maruti
Maruti reported in-line 15.5% yoy (1.7% mom) increase in total volumes for
February 2011 to 111,645 units led by strong momentum in the domestic
markets.
Domestic volumes increased 19.8% yoy (1.1% mom) selling 101,543 units,
while exports continued the downward trend posting 15% yoy decline to
10,102 units.
Growth in the domestic markets was backed by continued volume momentum
in the A2, A3 and C segments, which posted 19.4% (down 0.5% mom), 27.0%
(9.2% mom) and 26.9% yoy (down 2.9% mom) growth, respectively.
Maruti forayed into the A4 segment during the month with the launch of
Kizashi, a luxury sedan. It also launched a diesel version of its popular sedan,
SX4 during the month.
Mahindra & Mahindra
M&M reported strong volume growth of 25.4% yoy (down 8.4% mom) to
52,419 units for February 2011.
The tractor segment grew by a robust 36.8% yoy (down 7.1% mom), with
domestic tractor sales surging 38% yoy (down 6.7% mom). Tractor exports
registered a healthy 16.3% yoy growth as it continues to benefit from the
easing supply constraints.
The automotive segment grew by 19.7% yoy (down 9.1% mom) to 33,378
units. Within the automotive segment, four-wheeler pick-up sales grew by
13.4% yoy on the back of the strong performance registered by the GIO and
Maxximo range of vehicles. Logan sales also maintained the strong growth
momentum, posting 114.3% yoy growth, while three-wheeler sales jumped
57.2% yoy. Automotive exports registered muted 7.4% yoy growth during
February 2011.
During the month, Ssangyong Motor Co. launched the long-awaited new
sports utility vehicle (SUV), Korando C, in an attempt to get back on track and
become a global leader in SUV’s. This is its first new vehicle launch since
2008.
Management has indicated to launch 8-10 new products across segments by
March 2012.
Bajaj Auto
BAL reported an in-line volume growth of 21.7% yoy (4.2% mom) to 326,874
units, with better-than-expected numbers on the three-wheeler front.
The motorcycle segment posted 22.2% yoy (4% mom) growth during February
2011 with Pulsar and Discover accounting for ~67% of the overall motorcycle
sales. Management has guided two-wheeler volumes of 300,000 units in
March 2011.
The three-wheeler segment recorded better-than-expected 18.4% yoy growth
(5.9% mom) to 40,217 units on account of easing capacity constraints.
Exports grew 31.9% yoy to 102,433 units.
Going forward, with the addition of 130 new dealers from April 2011,
management expects the two-wheeler monthly run-rate to increase to
~350,000 units.
BAL launched a new version of the Discover 100 during the month.
Hero Honda
HH reported a marginally better-than-expected 23.5% yoy (1.2% mom) growth
in sales volume to 472,055 units led by strong performance across all the
product segments.
A refreshed product range, new product launches, innovative branding and
marketing initiatives continued to drive the company’s performance on the
volume front. The new Super Splendor and Splendor Pro launched in
September 2010 also helped the company in posting better volumes.
Pleasure is now clocking a monthly run-rate of ~30,000 units.
TVS Motor
TVS reported slightly better-than-expected 24.3% yoy (7.4% mom) growth in
total volumes to 177,412 units led by growth across all its segments and
backed by strong contribution from domestic sales.
Overall two-wheeler volumes jumped 23.2% yoy (7.1% mom), owing to an
impressive 49.3% yoy (down 1% mom) growth in scooter sales to 40,335 units
and 12.7% yoy (5.5% mom) growth in motorcycle sales to 71,462 units.
While Jive is clocking monthly volumes of ~4,000 units, Wego’s monthly
run-rate is ~14,000 units.
Three-wheeler sales continued its growth momentum and registered a strong
97.6% yoy jump in volumes to 4,212 units in February 2011.
On the exports front, volumes increased 25.6% yoy (23.3% mom) to
24,036 units.
Outlook
We remain positive on the Indian auto sector. Overall, we estimate auto volumes
to register ~13% CAGR over FY2010-12 aided by an 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 the auto players in sustaining
their top-line growth. However, higher input costs and rising 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 being positive on the
demand scenario. We prefer stocks where strong and improving fundamentals
could deliver positive earnings surprises. We continue to prefer companies in the
four-wheeler space over companies in the two-wheeler space, considering
reasonable valuations and volume growth visibility.
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