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Automakers maintained their strong volume momentum in March 2011,
recording double-digit sales growth. Despite expectations of a slowdown in
demand due to higher interest rates and product price increases, volume growth
remained buoyant on the back of positive consumer sentiment and heavy
discounts offered by OEMs and dealers to clear their year-end inventory. Among
the majors, Maruti, Hero Honda, TVS Motor and Ashok Leyland reported
better-than-expected numbers for the month. Going ahead, however, hikes in
product prices, increased fuel price along with higher interest rates would be the
major headwinds that could impact performance of the players.
Tata Motors (TML) reported 10.9% yoy (7.5% mom) growth in total volumes, led
by better-than-expected numbers in the commercial vehicles (CV) segment.
Growth in the CV segment was led by a bounce back in M&HCV and LCV sales,
which registered strong growth of 11.8% (30.6% mom) and 23.1% yoy (15.7%
mom), respectively. In the PV segment, TML reported a 0.4% yoy (12.9% mom)
drop in offtake, largely due to a 40.3% yoy (30.9% mom) decline in Indica
dispatches. Nano volumes remained strong, posting 84.9% yoy growth.
Ashok Leyland (ALL) posted better-than-expected numbers during the month,
registering a strong 20.9% yoy (24.2% mom) increase in volumes to 12,168 units.
Volume growth during the month was aided by strong performance from the
M&HCV goods segment. Overall domestic M&HCV vehicle volumes grew by
20.5% yoy, while exports posted healthy 11.5% yoy growth.
Maruti reported better-than-expected 28.2% yoy (strong 9.2% mom) volume
growth to 121,952 units, backed by strong performance in domestic markets.
Domestic volumes increased by impressive 38.8% yoy (8.7% mom), while exports
continued to witness sluggish growth, declining 26.1% yoy. Domestic performance
was led by robust volume growth in the A2, A3 and C segments, registering
43.3%, 33.1% and 32.6% yoy growth, respectively.
M&M reported 19.9% yoy (9.4% mom) growth in total sales to 57,370 units, in
line with our expectations. Growth was aided by strong 22.8% yoy growth in
tractor sales and healthy 18.4% yoy growth in automotive sales. In the tractors
space, domestic sales remained upbeat (up 24.5% yoy), posting the highest-ever
monthly sales, while exports growth remained flat. Within the automotive
segment, the four-wheeler pick-up segment grew by strong 15.4% yoy, sales of
Logan stayed impressive and three-wheelers posted 32% yoy growth.
Two-wheelers and three-wheelers: Bajaj Auto (BAL) posted marginally lower-thanexpected
overall sales growth of 12.2% yoy (down 5.9% mom), with motorcycle
sales and three-wheeler sales reporting growth of 12.1% and 13.6% yoy,
respectively. HH reported above-expectation 24.4% yoy (9.3% mom) growth in
monthly volumes to 515,852 units, led by robust performance across all product
segments. TVS reported better-than-expected 28.2% yoy (7.8% mom) growth in
total volumes to 191,208 units, led by strong growth across all its segments and
backed by sustained momentum in domestic sales.
Tata Motors
TML reported 10.9% yoy (7.5% mom) growth in total volumes, led by
better-than-expected numbers in the CV segment; however, PV sales came in
slightly below expectations.
Within the CV space, total volumes stood at 55,358 units, up 17.7% yoy
(22% mom), as the M&HCV and LCV segments registered strong growth of
11.8% (30.6% mom) and 23.1% yoy (15.7% mom), respectively.
In the PV segment, TML reported a 0.4% yoy (12.9% mom) decline in offtake,
mainly because of a 40.3% yoy (30.9% mom) fall in Indica’s dispatches
to 6,937 units.
Nano volumes remained strong, reporting an 84.9% yoy (5.4% mom)
jump, while the Indigo range of vehicles registered 4.5% yoy (19.7% mom)
drop in sales.
During the month, TML introduced the new Indica eV2, the most fuel-efficient
car in India with a mileage of 25kmpl.
Ashok Leyland
ALL reported better-than-expected numbers, registering a strong 20.9% yoy
(24.2% mom) increase in volumes to 12,168 units. Growth was led by strong
performance by the M&HCV goods segment.
M&HCV passenger vehicles reported 7.2% yoy growth (27.7% mom),
while M&HCV goods vehicles registered a substantial 25% yoy increase
(22.3% mom) in volumes. Overall domestic M&HCV vehicle volumes grew
by 20.5% yoy.
Exports during the month posted healthy 11.5% yoy growth.
Ashok Leyland-Nissan JV unveiled its first vehicle, Dost-1.25 tonne LCV, in
March 2011. The product will be launched in 2QFY2012.
Maruti
Maruti reported better-than-expected 28.2% yoy (strong 9.2% mom) volume
growth in March 2011 to 121,952 units. Growth was led by strong
momentum in domestic markets. Domestic volumes increased by impressive
38.8% yoy (8.7% mom) to 110,424 units.
However, Maruti continued to witness sluggish growth in exports markets and
reported a 26.1% yoy decline to 11,528 units. According to management, this
was due to the removal of scrappage incentives in European markets.
Growth in domestic markets came on the back of robust volume growth in the
A2, A3 and C segments, registering 43.3% (8.8% mom), 33.1% (6.8% mom)
and 32.6% yoy (6.5% mom) growth, respectively. Maruti reported its
highest-ever monthly sales during March 2011.
Mahindra & Mahindra
M&M reported 19.9% yoy (9.4% mom) growth in volumes to 57,370 units, in
line with our expectations. Growth was aided by strong 22.8% yoy growth in
tractor sales (19,848 units) and healthy 18.4% yoy growth in automotive sales
(37,522 units) during the month.
In the tractors space, domestic sales remained upbeat, posting a strong
increase of 24.5% yoy (3.3% mom) in volumes to 18,729 units, while exports
volumes remained flat at 1,119 units. The tractor segment posted its
highest-ever domestic sales in March 2011.
Within the automotive segment, the four-wheeler pick-up segment grew by
strong 15.4% yoy, sales Logan continues to remain impressive with 190% yoy
growth. Three-wheelers registered 32% yoy growth.
Automotive exports registered 16% yoy growth during March 2011.
Citing a strong outlook for the domestic tractor segment, M&M has decided to
set up a new tractor plant in Andhra Pradesh with an investment of `300cr.
The new facility will have a capacity of 100,000 tractors and is expected to be
operational by FY2012.
Bajaj Auto
BAL reported marginally lower-than-expected overall sales growth of 12.2%
yoy (down 5.9% mom) to 307,738 units.
Volume growth was led by 12.1% yoy (down 4.3% mom) growth in the
motorcycle segment, with Pulsar and Discover accounting for ~71% of overall
motorcycle sales.
The three-wheeler segment recorded 13.6% yoy (down 17.1% mom) growth to
33,349 units.
Exports reported slightly muted growth of 7.3% yoy to 69,884 units. This was
on account of ~32,000 units in transit and would be reflected in April 2011.
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 re-launched Discover 125cc during the month with a price tag of `45,500
(ex-showroom, New Delhi) for the base variant and `48,000 for the disc
brake version.
Hero Honda
HH reported above-expectation 24.4% yoy (9.3% mom) growth in its
monthly volumes to 515,852 units, led by robust performance across all
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 reported a monthly run-rate of ~30,000 units in March 2011.
TVS Motor
TVS reported better-than-expected 28.2% yoy (7.8% mom) growth in total
volumes to 191,208 units, led by strong growth across all its segments and
backed by sustained momentum in domestic sales. Two-wheeler volumes
increased by 27.3% yoy (7.8% mom), while three-wheeler sales jumped
by 82.1% yoy (5.1% mom).
Volume growth in the two-wheeler segment continued to be driven by
impressive 49.6% yoy (5.8% mom) growth in scooters to 42,655 units and
24.2% yoy (11.4% mom) growth in motorcycle sales to 79,642 units.
Jive reported monthly volumes of ~4,000 units, while Wego’s monthly
run-rate was ~14,000 units.
Exports increased by 34.4% yoy (12.2% mom) to 26,979 units, registering the
highest-ever monthly exports.
Outlook
We remain positive on the Indian auto sector. Overall, we estimate auto volumes
to register a CAGR of 11-12% over FY2011–13E, 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 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 to 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 �� ��
Automakers maintained their strong volume momentum in March 2011,
recording double-digit sales growth. Despite expectations of a slowdown in
demand due to higher interest rates and product price increases, volume growth
remained buoyant on the back of positive consumer sentiment and heavy
discounts offered by OEMs and dealers to clear their year-end inventory. Among
the majors, Maruti, Hero Honda, TVS Motor and Ashok Leyland reported
better-than-expected numbers for the month. Going ahead, however, hikes in
product prices, increased fuel price along with higher interest rates would be the
major headwinds that could impact performance of the players.
Tata Motors (TML) reported 10.9% yoy (7.5% mom) growth in total volumes, led
by better-than-expected numbers in the commercial vehicles (CV) segment.
Growth in the CV segment was led by a bounce back in M&HCV and LCV sales,
which registered strong growth of 11.8% (30.6% mom) and 23.1% yoy (15.7%
mom), respectively. In the PV segment, TML reported a 0.4% yoy (12.9% mom)
drop in offtake, largely due to a 40.3% yoy (30.9% mom) decline in Indica
dispatches. Nano volumes remained strong, posting 84.9% yoy growth.
Ashok Leyland (ALL) posted better-than-expected numbers during the month,
registering a strong 20.9% yoy (24.2% mom) increase in volumes to 12,168 units.
Volume growth during the month was aided by strong performance from the
M&HCV goods segment. Overall domestic M&HCV vehicle volumes grew by
20.5% yoy, while exports posted healthy 11.5% yoy growth.
Maruti reported better-than-expected 28.2% yoy (strong 9.2% mom) volume
growth to 121,952 units, backed by strong performance in domestic markets.
Domestic volumes increased by impressive 38.8% yoy (8.7% mom), while exports
continued to witness sluggish growth, declining 26.1% yoy. Domestic performance
was led by robust volume growth in the A2, A3 and C segments, registering
43.3%, 33.1% and 32.6% yoy growth, respectively.
M&M reported 19.9% yoy (9.4% mom) growth in total sales to 57,370 units, in
line with our expectations. Growth was aided by strong 22.8% yoy growth in
tractor sales and healthy 18.4% yoy growth in automotive sales. In the tractors
space, domestic sales remained upbeat (up 24.5% yoy), posting the highest-ever
monthly sales, while exports growth remained flat. Within the automotive
segment, the four-wheeler pick-up segment grew by strong 15.4% yoy, sales of
Logan stayed impressive and three-wheelers posted 32% yoy growth.
Two-wheelers and three-wheelers: Bajaj Auto (BAL) posted marginally lower-thanexpected
overall sales growth of 12.2% yoy (down 5.9% mom), with motorcycle
sales and three-wheeler sales reporting growth of 12.1% and 13.6% yoy,
respectively. HH reported above-expectation 24.4% yoy (9.3% mom) growth in
monthly volumes to 515,852 units, led by robust performance across all product
segments. TVS reported better-than-expected 28.2% yoy (7.8% mom) growth in
total volumes to 191,208 units, led by strong growth across all its segments and
backed by sustained momentum in domestic sales.
Tata Motors
TML reported 10.9% yoy (7.5% mom) growth in total volumes, led by
better-than-expected numbers in the CV segment; however, PV sales came in
slightly below expectations.
Within the CV space, total volumes stood at 55,358 units, up 17.7% yoy
(22% mom), as the M&HCV and LCV segments registered strong growth of
11.8% (30.6% mom) and 23.1% yoy (15.7% mom), respectively.
In the PV segment, TML reported a 0.4% yoy (12.9% mom) decline in offtake,
mainly because of a 40.3% yoy (30.9% mom) fall in Indica’s dispatches
to 6,937 units.
Nano volumes remained strong, reporting an 84.9% yoy (5.4% mom)
jump, while the Indigo range of vehicles registered 4.5% yoy (19.7% mom)
drop in sales.
During the month, TML introduced the new Indica eV2, the most fuel-efficient
car in India with a mileage of 25kmpl.
Ashok Leyland
ALL reported better-than-expected numbers, registering a strong 20.9% yoy
(24.2% mom) increase in volumes to 12,168 units. Growth was led by strong
performance by the M&HCV goods segment.
M&HCV passenger vehicles reported 7.2% yoy growth (27.7% mom),
while M&HCV goods vehicles registered a substantial 25% yoy increase
(22.3% mom) in volumes. Overall domestic M&HCV vehicle volumes grew
by 20.5% yoy.
Exports during the month posted healthy 11.5% yoy growth.
Ashok Leyland-Nissan JV unveiled its first vehicle, Dost-1.25 tonne LCV, in
March 2011. The product will be launched in 2QFY2012.
Maruti
Maruti reported better-than-expected 28.2% yoy (strong 9.2% mom) volume
growth in March 2011 to 121,952 units. Growth was led by strong
momentum in domestic markets. Domestic volumes increased by impressive
38.8% yoy (8.7% mom) to 110,424 units.
However, Maruti continued to witness sluggish growth in exports markets and
reported a 26.1% yoy decline to 11,528 units. According to management, this
was due to the removal of scrappage incentives in European markets.
Growth in domestic markets came on the back of robust volume growth in the
A2, A3 and C segments, registering 43.3% (8.8% mom), 33.1% (6.8% mom)
and 32.6% yoy (6.5% mom) growth, respectively. Maruti reported its
highest-ever monthly sales during March 2011.
Mahindra & Mahindra
M&M reported 19.9% yoy (9.4% mom) growth in volumes to 57,370 units, in
line with our expectations. Growth was aided by strong 22.8% yoy growth in
tractor sales (19,848 units) and healthy 18.4% yoy growth in automotive sales
(37,522 units) during the month.
In the tractors space, domestic sales remained upbeat, posting a strong
increase of 24.5% yoy (3.3% mom) in volumes to 18,729 units, while exports
volumes remained flat at 1,119 units. The tractor segment posted its
highest-ever domestic sales in March 2011.
Within the automotive segment, the four-wheeler pick-up segment grew by
strong 15.4% yoy, sales Logan continues to remain impressive with 190% yoy
growth. Three-wheelers registered 32% yoy growth.
Automotive exports registered 16% yoy growth during March 2011.
Citing a strong outlook for the domestic tractor segment, M&M has decided to
set up a new tractor plant in Andhra Pradesh with an investment of `300cr.
The new facility will have a capacity of 100,000 tractors and is expected to be
operational by FY2012.
Bajaj Auto
BAL reported marginally lower-than-expected overall sales growth of 12.2%
yoy (down 5.9% mom) to 307,738 units.
Volume growth was led by 12.1% yoy (down 4.3% mom) growth in the
motorcycle segment, with Pulsar and Discover accounting for ~71% of overall
motorcycle sales.
The three-wheeler segment recorded 13.6% yoy (down 17.1% mom) growth to
33,349 units.
Exports reported slightly muted growth of 7.3% yoy to 69,884 units. This was
on account of ~32,000 units in transit and would be reflected in April 2011.
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 re-launched Discover 125cc during the month with a price tag of `45,500
(ex-showroom, New Delhi) for the base variant and `48,000 for the disc
brake version.
Hero Honda
HH reported above-expectation 24.4% yoy (9.3% mom) growth in its
monthly volumes to 515,852 units, led by robust performance across all
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 reported a monthly run-rate of ~30,000 units in March 2011.
TVS Motor
TVS reported better-than-expected 28.2% yoy (7.8% mom) growth in total
volumes to 191,208 units, led by strong growth across all its segments and
backed by sustained momentum in domestic sales. Two-wheeler volumes
increased by 27.3% yoy (7.8% mom), while three-wheeler sales jumped
by 82.1% yoy (5.1% mom).
Volume growth in the two-wheeler segment continued to be driven by
impressive 49.6% yoy (5.8% mom) growth in scooters to 42,655 units and
24.2% yoy (11.4% mom) growth in motorcycle sales to 79,642 units.
Jive reported monthly volumes of ~4,000 units, while Wego’s monthly
run-rate was ~14,000 units.
Exports increased by 34.4% yoy (12.2% mom) to 26,979 units, registering the
highest-ever monthly exports.
Outlook
We remain positive on the Indian auto sector. Overall, we estimate auto volumes
to register a CAGR of 11-12% over FY2011–13E, 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 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 to companies in the two-wheeler space, considering
reasonable valuations and volume growth visibility.
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