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UBS Investment Research
India Auto Sector
Mar’11 – Topping off a strong year
Passenger vehicles: Maruti continues strong domestic sales
Maruti volumes grew 28% YoY (+9%MoM) driven by strong growth in domestic
volumes (+39% YoY). Domestic segment growth was helped by strong growth in
A2 (+43% YoY), A3 (+33% YoY) and Van segment (+33% YoY). Exports
declined 26% YoY. M&M passenger UVs sales increased 14% YoY. Hyundai’s
domestic sales increased 1% YoY.
Hero Honda 2W and M&M tractors also continue strong growth
Hero Honda 2W sales grew 24% YoY (+9% MoM). M&M 3Ws grew at 32% YoY
and 4-W pick ups (incl. Gio & Maxximo) recorded a growth of 15% YoY. M&M
domestic tractor shipments grew at 25%YoY and exports declined by 1% YoY.
Tata Motors – CVs remain robust; PV growth remains flat
Tata Motors MHCV grew by 12%YoY (+32% MoM), while LCV segment grew
18%YoY (+12% MoM). Passenger vehicles sales remained flat. Nano shipments
increased 5% MoM to 8,707 units (+85%YoY). Indica shipments declined sharply
by 40% YoY while sales of Indigo declined by 5% YoY. UVs grew 24%YoY
(+4% MoM).
Sector valuation attractive: Prefer Maruti, Hero Honda and Tata Motors
We expect rural growth to remain strong in FY12 and prefer Hero Honda due to its
high rural exposure. We like Maruti given margins have bottomed and valuations
are compelling. We also like Tata Motors given strong outlook for JLR.
Valuation
Hero Honda
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation driver using UBS’s VCAM tool, assuming a WACC of 11.5%.
Maruti
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation driver using UBS’s VCAM tool, assuming a WACC of 11.5%.
Tata Motors
We value domestic business and subs on 9x 12 month forward EBITDA and JLR at
5x 12 month fwd EBITDA. We adjust our EBITDA for R&D capitalization.
Statement of Risk
Principal risk to our earnings estimates for Hero Honda, Maruti and Tata Motor
are fluctuation in sales volumes and raw material prices. Demand is linked to
various factors including the economic growth rate and interest rates in the
economy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
India Auto Sector
Mar’11 – Topping off a strong year
Passenger vehicles: Maruti continues strong domestic sales
Maruti volumes grew 28% YoY (+9%MoM) driven by strong growth in domestic
volumes (+39% YoY). Domestic segment growth was helped by strong growth in
A2 (+43% YoY), A3 (+33% YoY) and Van segment (+33% YoY). Exports
declined 26% YoY. M&M passenger UVs sales increased 14% YoY. Hyundai’s
domestic sales increased 1% YoY.
Hero Honda 2W and M&M tractors also continue strong growth
Hero Honda 2W sales grew 24% YoY (+9% MoM). M&M 3Ws grew at 32% YoY
and 4-W pick ups (incl. Gio & Maxximo) recorded a growth of 15% YoY. M&M
domestic tractor shipments grew at 25%YoY and exports declined by 1% YoY.
Tata Motors – CVs remain robust; PV growth remains flat
Tata Motors MHCV grew by 12%YoY (+32% MoM), while LCV segment grew
18%YoY (+12% MoM). Passenger vehicles sales remained flat. Nano shipments
increased 5% MoM to 8,707 units (+85%YoY). Indica shipments declined sharply
by 40% YoY while sales of Indigo declined by 5% YoY. UVs grew 24%YoY
(+4% MoM).
Sector valuation attractive: Prefer Maruti, Hero Honda and Tata Motors
We expect rural growth to remain strong in FY12 and prefer Hero Honda due to its
high rural exposure. We like Maruti given margins have bottomed and valuations
are compelling. We also like Tata Motors given strong outlook for JLR.
Valuation
Hero Honda
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation driver using UBS’s VCAM tool, assuming a WACC of 11.5%.
Maruti
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation driver using UBS’s VCAM tool, assuming a WACC of 11.5%.
Tata Motors
We value domestic business and subs on 9x 12 month forward EBITDA and JLR at
5x 12 month fwd EBITDA. We adjust our EBITDA for R&D capitalization.
Statement of Risk
Principal risk to our earnings estimates for Hero Honda, Maruti and Tata Motor
are fluctuation in sales volumes and raw material prices. Demand is linked to
various factors including the economic growth rate and interest rates in the
economy.
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