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Automobiles
India
In top gear. Auto volumes remained in top gear in March driven by festive season
demand, rising discounts in passenger car segment and upbeat consumer sentiment.
All manufacturers’ sales surpassed our expectations as retail demand continues to
remain buoyant indicating normal dealer inventory levels. Hero Honda and Maruti
volumes were well ahead of our expectations while only Mahindra tractor sales
disappointed a bit.
Hero Honda surpasses its FY2011 guidance
Hero Honda reported a 24.4% yoy volume growth in March 2011 and 17% yoy growth in
FY2011 surpassing its initial guidance of 5 million units. Company launched seven new
models/refreshes which aided volumes. Hero Honda has picked up momentum in 4QFY11
registering a 23% yoy volume growth versus 15.7% yoy growth in 9MFY11 driven by increase in
sales promotion activities. TVS Motors also continued its strong run reporting a 28% yoy growth in
volumes driven by strong growth in all three segments (mopeds, motorcycles and scooters).
Maruti retail sales increases by >22% mom while tractor sales disappoint a bit
Maruti reported a 39% yoy growth in domestic volumes while exports volumes declined by 26%
yoy in March 2011. Retail volumes could have increased by >22% mom, according to the
management, which indicates that inventory levels are at normal levels. Maruti’s product mix
improved in 4QFY11 as A3 mix improved to 11.4% of volumes in 4Q versus 9.7% in 3Q, which
coupled with a 0.8% price increase in January and hedged currency exposure till March 2011
should help Maruti maintain margins at 3Q levels.
Mahindra reported a healthy 15% yoy growth in utility vehicle volumes and 23% yoy growth in
tractor volumes. Maxximo (including pick-ups and Gio) segment grew by 15% yoy moderating a
bit as base effect stiffens. Domestic tractor volumes were up 25% yoy while tractor exports
declined by 1%. M&M’s product mix is likely to be adverse in 4QFY11 versus 3QFY11 as tractor
volumes as a percentage of volumes will be 36% in 4Q versus 38.5% in 3Q.
Commercial vehicle volumes of Tata Motors rebounded sharply
Tata Motors’ domestic commercial vehicle volumes were up 15% yoy driven by 18% yoy growth in
LCV volumes and a 12% yoy growth in MHCV volumes. In light of moderating industrial
production numbers over the past few months, we expect commercial vehicle volume growth to
moderate as well. Between January and February 2011 domestic commercial vehicle volume
growth has moderated to 15% yoy versus 50% in 9MFY11. Tata Motors’ domestic car sales were
flat yoy having lost market share to Maruti Suzuki, in our view, while utility vehicle volumes were
up 24% yoy in March 2011.
Volume growth to remain healthy in FY2012E but likely to moderate, in our view
We retain our domestic volume growth assumptions for the industry for FY2012E – passenger cars
at 18% yoy, two-wheelers at 14% yoy and trucks at 12% yoy as strong hiring trends and strong
GDP growth should keep demand above historical average levels. However, we believe EBITDA
margins could be under pressure given sharp rise in input costs since December 2010. Our top
picks are: (1) Mahindra and Mahindra – strong pricing power to protect decline in margins, and
(2) Maruti – beneficiary of strong passenger car demand.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Automobiles
India
In top gear. Auto volumes remained in top gear in March driven by festive season
demand, rising discounts in passenger car segment and upbeat consumer sentiment.
All manufacturers’ sales surpassed our expectations as retail demand continues to
remain buoyant indicating normal dealer inventory levels. Hero Honda and Maruti
volumes were well ahead of our expectations while only Mahindra tractor sales
disappointed a bit.
Hero Honda surpasses its FY2011 guidance
Hero Honda reported a 24.4% yoy volume growth in March 2011 and 17% yoy growth in
FY2011 surpassing its initial guidance of 5 million units. Company launched seven new
models/refreshes which aided volumes. Hero Honda has picked up momentum in 4QFY11
registering a 23% yoy volume growth versus 15.7% yoy growth in 9MFY11 driven by increase in
sales promotion activities. TVS Motors also continued its strong run reporting a 28% yoy growth in
volumes driven by strong growth in all three segments (mopeds, motorcycles and scooters).
Maruti retail sales increases by >22% mom while tractor sales disappoint a bit
Maruti reported a 39% yoy growth in domestic volumes while exports volumes declined by 26%
yoy in March 2011. Retail volumes could have increased by >22% mom, according to the
management, which indicates that inventory levels are at normal levels. Maruti’s product mix
improved in 4QFY11 as A3 mix improved to 11.4% of volumes in 4Q versus 9.7% in 3Q, which
coupled with a 0.8% price increase in January and hedged currency exposure till March 2011
should help Maruti maintain margins at 3Q levels.
Mahindra reported a healthy 15% yoy growth in utility vehicle volumes and 23% yoy growth in
tractor volumes. Maxximo (including pick-ups and Gio) segment grew by 15% yoy moderating a
bit as base effect stiffens. Domestic tractor volumes were up 25% yoy while tractor exports
declined by 1%. M&M’s product mix is likely to be adverse in 4QFY11 versus 3QFY11 as tractor
volumes as a percentage of volumes will be 36% in 4Q versus 38.5% in 3Q.
Commercial vehicle volumes of Tata Motors rebounded sharply
Tata Motors’ domestic commercial vehicle volumes were up 15% yoy driven by 18% yoy growth in
LCV volumes and a 12% yoy growth in MHCV volumes. In light of moderating industrial
production numbers over the past few months, we expect commercial vehicle volume growth to
moderate as well. Between January and February 2011 domestic commercial vehicle volume
growth has moderated to 15% yoy versus 50% in 9MFY11. Tata Motors’ domestic car sales were
flat yoy having lost market share to Maruti Suzuki, in our view, while utility vehicle volumes were
up 24% yoy in March 2011.
Volume growth to remain healthy in FY2012E but likely to moderate, in our view
We retain our domestic volume growth assumptions for the industry for FY2012E – passenger cars
at 18% yoy, two-wheelers at 14% yoy and trucks at 12% yoy as strong hiring trends and strong
GDP growth should keep demand above historical average levels. However, we believe EBITDA
margins could be under pressure given sharp rise in input costs since December 2010. Our top
picks are: (1) Mahindra and Mahindra – strong pricing power to protect decline in margins, and
(2) Maruti – beneficiary of strong passenger car demand.
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