Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Automobiles
India
4QFY11 results preview. We expect a strong quarter from auto companies in our
coverage universe due to strong volume growth and moderate sequential impact on
EBITDA margins. Sharp rise in raw material costs will partially impact companies, in our
view, due to (1) fixed steel contracts till March 2011, (2) most companies have taken 1-
1.5% average price increase in January and (3) product mix has improved for some
companies which could offset impact of rise in commodity costs, in our view.
We expect a strong quarter for auto companies
We forecast earnings of companies in our coverage universe to increase by 43% yoy and 17% qoq.
We expect revenues to increase by 28% yoy and 13% qoq while we estimate EBITDA margins to
decline by 30 bps yoy and remain flat qoq. Since December we have seen a sharp rise in input costs,
especially steel (increased by 15%), aluminium by 7% and rubber by 16%. However, most auto
companies have six-month contracts on steel which are likely to end in March 2011 and have
increased prices by an average 1-1.5% to offset rise in input costs.
Tata Motors, Ashok Leyland and Bharat Forge are likely to outperform peers
We expect Tata Motors, Ashok Leyland and Bharat Forge to outperform other auto companies in
our coverage universe on a sequential basis. Tata Motors is likely to report a strong growth in
domestic volumes while JLR margins are likely to improve slightly qoq due to improvement in the
Land Rover mix in overall sales. Ashok Leyland will be a key beneficiary of strong growth in truck
volumes (61% qoq growth in volumes) and improvement in product mix (higher share of trucks in
the overall mix in 4Q versus 3Q). Bharat Forge is likely to benefit from strong growth in exports and
non-auto revenues.
Bajaj Auto, Tata Motors and M&M likely to see sequential decline in EBITDA margins
We expect Bajaj Auto, Tata Motors and M&M to report a 60-70 bps qoq decline in EBITDA
margins due to inferior product mix. Bajaj Auto’s lower-margin bike (less than 125cc) volumes are
likely to increase to 47% of total volumes in 4QFY11 versus 44.5% in 3QFY11 while contribution
of three-wheelers to total volumes is likely to marginally improve to 12% in 4QFY11 versus 11.4%
in 3QFY11. For Tata Motors, lower-margin passenger car volumes as a percentage of total
standalone volumes are likely to increase to 33% in 4Q versus 27% in 3Q which is likely to result
in sequential decline in standalone EBITDA margins while JLR margins are likely to improve slightly.
M&M’s tractor volume mix in overall volumes is likely to decline to 36% in 4QFY11 versus 38% in
3QFY11 which is likely to result in a 60 bps qoq decline in EBITDA margins. M&M has also taken
2% increase in tractor prices from March 1 which is not likely to fully offset raw material cost
pressure in this quarter, in our view.
Our top picks remain M&M and Maruti Suzuki. However, we see upside risks to Ashok Leyland’s
and Tata Motors’ FY2011 estimates if the company meets our 4QFY11 estimates. JLR performance
has surprised positively despite high fuel prices in this quarter.
4QFY11 results preview
We expect a very strong quarter for auto companies driven by strong volume growth. We
forecast earnings of companies in our coverage universe to increase by 43% yoy and 17%
qoq. We expect revenues to increase by 28% yoy and 13% qoq while we estimate EBITDA
margins to decline by 30 bps yoy and remain flat qoq. Since December we have seen a sharp
rise in input costs, especially steel (increased by 15%), aluminium by 7% and rubber by 16%.
However, most auto companies have taken six-month contracts on steel which are likely to
end in March 2011 and have increased prices by an average 1-1.5% to offset rise in input
costs.
Currencies not likely to play spoilsport during the quarter
We expect impact of currency to be neutral for Maruti because the company has hedged
JPY-INR exposure on direct imports and EUR-INR exposure during the quarter. We do not
expect any major impact of currency on indirect imports as it hits Maruti with a quarter lag;
last quarter JPY appreciated by only 0.6% versus INR. GBP has appreciated versus USD by
1.7% and versus Euro by 0.6% which is likely to impact margins of Jaguar and Land Rover
moderately. The Land Rover mix in the overall mix has improved significantly to 85% in
January-February 2011 versus 79% in the October-December 2010 period which should
offset moderate negative impact of currency.
Tata Motors, Ashok Leyland and Bharat Forge likely to outperform peers
We expect Tata Motors, Ashok Leyland and Bharat Forge to outperform other auto
companies in our coverage universe on a sequential basis. Tata Motors is likely to report a
strong growth in domestic volumes while JLR margins are likely to improve slightly qoq due
to improvement in the Land Rover mix in overall sales. Ashok Leyland will be a key
beneficiary of strong growth in truck volumes (61% qoq growth in volumes) and
improvement in product mix (higher share of trucks in the overall mix in 4Q versus 3Q).
Bharat Forge is likely to benefit from strong growth in exports and non-auto revenues.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Automobiles
India
4QFY11 results preview. We expect a strong quarter from auto companies in our
coverage universe due to strong volume growth and moderate sequential impact on
EBITDA margins. Sharp rise in raw material costs will partially impact companies, in our
view, due to (1) fixed steel contracts till March 2011, (2) most companies have taken 1-
1.5% average price increase in January and (3) product mix has improved for some
companies which could offset impact of rise in commodity costs, in our view.
We expect a strong quarter for auto companies
We forecast earnings of companies in our coverage universe to increase by 43% yoy and 17% qoq.
We expect revenues to increase by 28% yoy and 13% qoq while we estimate EBITDA margins to
decline by 30 bps yoy and remain flat qoq. Since December we have seen a sharp rise in input costs,
especially steel (increased by 15%), aluminium by 7% and rubber by 16%. However, most auto
companies have six-month contracts on steel which are likely to end in March 2011 and have
increased prices by an average 1-1.5% to offset rise in input costs.
Tata Motors, Ashok Leyland and Bharat Forge are likely to outperform peers
We expect Tata Motors, Ashok Leyland and Bharat Forge to outperform other auto companies in
our coverage universe on a sequential basis. Tata Motors is likely to report a strong growth in
domestic volumes while JLR margins are likely to improve slightly qoq due to improvement in the
Land Rover mix in overall sales. Ashok Leyland will be a key beneficiary of strong growth in truck
volumes (61% qoq growth in volumes) and improvement in product mix (higher share of trucks in
the overall mix in 4Q versus 3Q). Bharat Forge is likely to benefit from strong growth in exports and
non-auto revenues.
Bajaj Auto, Tata Motors and M&M likely to see sequential decline in EBITDA margins
We expect Bajaj Auto, Tata Motors and M&M to report a 60-70 bps qoq decline in EBITDA
margins due to inferior product mix. Bajaj Auto’s lower-margin bike (less than 125cc) volumes are
likely to increase to 47% of total volumes in 4QFY11 versus 44.5% in 3QFY11 while contribution
of three-wheelers to total volumes is likely to marginally improve to 12% in 4QFY11 versus 11.4%
in 3QFY11. For Tata Motors, lower-margin passenger car volumes as a percentage of total
standalone volumes are likely to increase to 33% in 4Q versus 27% in 3Q which is likely to result
in sequential decline in standalone EBITDA margins while JLR margins are likely to improve slightly.
M&M’s tractor volume mix in overall volumes is likely to decline to 36% in 4QFY11 versus 38% in
3QFY11 which is likely to result in a 60 bps qoq decline in EBITDA margins. M&M has also taken
2% increase in tractor prices from March 1 which is not likely to fully offset raw material cost
pressure in this quarter, in our view.
Our top picks remain M&M and Maruti Suzuki. However, we see upside risks to Ashok Leyland’s
and Tata Motors’ FY2011 estimates if the company meets our 4QFY11 estimates. JLR performance
has surprised positively despite high fuel prices in this quarter.
4QFY11 results preview
We expect a very strong quarter for auto companies driven by strong volume growth. We
forecast earnings of companies in our coverage universe to increase by 43% yoy and 17%
qoq. We expect revenues to increase by 28% yoy and 13% qoq while we estimate EBITDA
margins to decline by 30 bps yoy and remain flat qoq. Since December we have seen a sharp
rise in input costs, especially steel (increased by 15%), aluminium by 7% and rubber by 16%.
However, most auto companies have taken six-month contracts on steel which are likely to
end in March 2011 and have increased prices by an average 1-1.5% to offset rise in input
costs.
Currencies not likely to play spoilsport during the quarter
We expect impact of currency to be neutral for Maruti because the company has hedged
JPY-INR exposure on direct imports and EUR-INR exposure during the quarter. We do not
expect any major impact of currency on indirect imports as it hits Maruti with a quarter lag;
last quarter JPY appreciated by only 0.6% versus INR. GBP has appreciated versus USD by
1.7% and versus Euro by 0.6% which is likely to impact margins of Jaguar and Land Rover
moderately. The Land Rover mix in the overall mix has improved significantly to 85% in
January-February 2011 versus 79% in the October-December 2010 period which should
offset moderate negative impact of currency.
Tata Motors, Ashok Leyland and Bharat Forge likely to outperform peers
We expect Tata Motors, Ashok Leyland and Bharat Forge to outperform other auto
companies in our coverage universe on a sequential basis. Tata Motors is likely to report a
strong growth in domestic volumes while JLR margins are likely to improve slightly qoq due
to improvement in the Land Rover mix in overall sales. Ashok Leyland will be a key
beneficiary of strong growth in truck volumes (61% qoq growth in volumes) and
improvement in product mix (higher share of trucks in the overall mix in 4Q versus 3Q).
Bharat Forge is likely to benefit from strong growth in exports and non-auto revenues.
No comments:
Post a Comment