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India Equity Research Reports, IPO and Stock News
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SECTOR QUICK COMMENT
March 2011 volumes displayed an improving trend on the back of strong February 2011 volumes. We were in particular surprised by 39% volume growth in the domestic car market for Maruti Suzuki. Mahindra and Mahindra reported healthy growth of 20%. We maintain our BUY rating on both of these companies. Hero Honda (+24%), TVS Motors (+28%) and Tata Motors (+11%) reported healthy volumes. We expect Bajaj Auto (+12%) and Ashok Leyland (+12%) to report volume growth.
Improved volume growth in March
Maruti Suzuki India Ltd (MSIL, INR 1,271.1)
MSIL reported strong wholesale volume growth of 28% YoY. We were expecting volume growth to be around 15% and were positively surprised by the numbers. We believe that there are three reasons for positive surprise: 1) Discount levels in March 2011 were slightly higher than in February 2011. 2) Maruti has gained market share in the last few months, particularly with the help of Alto K10. 3) The base in March was much lower, as there was pre-buying in February 2010 (due to expectations of an increase in duties), and thus there were lower sales in March 2010. The expectations of an increase in duties in February 2011 were not as high. While export volumes have declined, given the low profitability from export, domestic volume growth is much more important. FY11 volume growth at 25% was in line with our estimates. According to our discussions with management, retail volumes have been slightly higher than wholesale volume, and there is no slowdown in demand.
Maintain BUY.
Mahindra and Mahindra (MM, IRN 710.1)
Mahindra and Mahindra reported strong volume growth of 20% YoY. Auto sector volumes were up 18%, and tractor volumes were by 23%. SAAR for UVs and four-wheeler pickups have improved. We expect the stock to react positively to these numbers. The company ended FY11 with volumes of 213,000 units for tractors (Nomura Est: 211,585) and UV + 4W pickup volumes of 291,931 units (Nomura Est: 284,698), both slightly better than our estimates.
Because tractors are more profitable, strong growth in tractors is positive for margins. Management indicated that demand momentum remains strong across all categories.
Volumes for Ssangyong motors improved to 10,200 units, with 78% YoY growth and 52% MoM growth. Domestic volumes improved 83% YoY and 96% MoM to 4,700 units, compared with 8.4% YoY and 25% MoM for the industry. Export volumes improved to 5,500 units, with 74% YoY growth. The company seems to be on track for a strong revival in volumes. It sold only 80,000 units in 2010 and is targeting an additional 45,000 units from the new model Korando C.
Maintain BUY.
Tata Motors (TTMT, INR 1,241.8)
Tata Motors reported volume growth of 11% YoY for March 2011. For the important category of MHCVs, volumes increased 12% in the domestic market, with an improvement in SAAR.
LCV volumes increased 18% YoY. Car volumes were weak, with a 4% decline in the domestic market compared with 38% growth for Maruti Suzuki. UV volumes increased 24% YoY.
Strong commercial vehicle volumes will be taken positively by the market, in our view. We expect Ashok Leyland to report 10%
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
SECTOR QUICK COMMENT
March 2011 volumes displayed an improving trend on the back of strong February 2011 volumes. We were in particular surprised by 39% volume growth in the domestic car market for Maruti Suzuki. Mahindra and Mahindra reported healthy growth of 20%. We maintain our BUY rating on both of these companies. Hero Honda (+24%), TVS Motors (+28%) and Tata Motors (+11%) reported healthy volumes. We expect Bajaj Auto (+12%) and Ashok Leyland (+12%) to report volume growth.
Improved volume growth in March
Maruti Suzuki India Ltd (MSIL, INR 1,271.1)
MSIL reported strong wholesale volume growth of 28% YoY. We were expecting volume growth to be around 15% and were positively surprised by the numbers. We believe that there are three reasons for positive surprise: 1) Discount levels in March 2011 were slightly higher than in February 2011. 2) Maruti has gained market share in the last few months, particularly with the help of Alto K10. 3) The base in March was much lower, as there was pre-buying in February 2010 (due to expectations of an increase in duties), and thus there were lower sales in March 2010. The expectations of an increase in duties in February 2011 were not as high. While export volumes have declined, given the low profitability from export, domestic volume growth is much more important. FY11 volume growth at 25% was in line with our estimates. According to our discussions with management, retail volumes have been slightly higher than wholesale volume, and there is no slowdown in demand.
Maintain BUY.
Mahindra and Mahindra (MM, IRN 710.1)
Mahindra and Mahindra reported strong volume growth of 20% YoY. Auto sector volumes were up 18%, and tractor volumes were by 23%. SAAR for UVs and four-wheeler pickups have improved. We expect the stock to react positively to these numbers. The company ended FY11 with volumes of 213,000 units for tractors (Nomura Est: 211,585) and UV + 4W pickup volumes of 291,931 units (Nomura Est: 284,698), both slightly better than our estimates.
Because tractors are more profitable, strong growth in tractors is positive for margins. Management indicated that demand momentum remains strong across all categories.
Volumes for Ssangyong motors improved to 10,200 units, with 78% YoY growth and 52% MoM growth. Domestic volumes improved 83% YoY and 96% MoM to 4,700 units, compared with 8.4% YoY and 25% MoM for the industry. Export volumes improved to 5,500 units, with 74% YoY growth. The company seems to be on track for a strong revival in volumes. It sold only 80,000 units in 2010 and is targeting an additional 45,000 units from the new model Korando C.
Maintain BUY.
Tata Motors (TTMT, INR 1,241.8)
Tata Motors reported volume growth of 11% YoY for March 2011. For the important category of MHCVs, volumes increased 12% in the domestic market, with an improvement in SAAR.
LCV volumes increased 18% YoY. Car volumes were weak, with a 4% decline in the domestic market compared with 38% growth for Maruti Suzuki. UV volumes increased 24% YoY.
Strong commercial vehicle volumes will be taken positively by the market, in our view. We expect Ashok Leyland to report 10%
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