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2Ws holding up better than 4Ws
In May-11, India’s car sales grew 9% YoY, 2Ws grew 14% YoY while CVs
grew 16% YoY. The sharp slowdown in growth over the last 2 months is inline
with the findings of our recent dealer survey which indicated significant
weakness in retail demand since Mar-11. 2Ws and goods LCVs were the only
segments to report double digit growth in May. We expect growth of 16%,
12% and 0% for cars, 2Ws and M&HCVs respectively in FY12; but there could
be downside to our estimates for cars and M&HCVs. We see a tough year
ahead for auto stocks given the weak demand environment. 2012 might be a
better year if interest rates start going down and demand recovers. M&M
remains our top 12m pick but 2Ws might be a better near-term defensive.
Cars & UVs: Single digit growth rates in May; see downside to estimates
q Domestic car sales rose just 9% YoY in May-11. YTD growth stands at 12%.
q The sharp slowdown in growth over the last 2 months is in-line with the findings of
our recent dealer survey where we observed a sharp increase in the number of
dealers reporting weakness in retail demand since Mar-11.
q We expect cars to grow at 16% in FY12 but now see downside to our estimate.
q Maruti’s gained 350bps MoM market share to 52% in May, primarily from Tata.
q UV sales grew just 6% YoY for the 2nd month in a row; M&M gained 240bps share.
CVs: Trucks growth down to 9% YoY; goods LCVs still strong
q Truck sales rose a modest 9% YoY in May. YTD growth stands at 7%. We expect
0% growth in FY12 post two years of 30%+ growth.
q Goods LCVs growth was still robust at 25% YoY in May-11.
q Tata gained share in trucks (from ALL) but lost share in goods LCVs (to M&M).
2Ws/3Ws: 2W growth holding up better but 3Ws slowing down
q 2W sales grew at 14% YoY in May-11 and are holding up better than 4W growth;
scooters growth slowed down sharply to 11% and is now lower than motorcycles.
q Hero Honda lost 300bps MoM market share as Bajaj regained share in May.
q Passenger 3W sales grew a modest 7% YoY in May; growth is slowing here as well.
Tough year ahead for auto stocks; favour M&M
q We see FY12 as a tough year for auto stocks given weakening demand, rising
competition and no respite in input cost pressures.
q 2Ws might be a better near-term defensive but we see limited absolute return
potential and are concerned on rising competition FY13 onwards; 4W stocks are
likely to remain languid near-term but might recover towards end-FY12 if interest
rates start moving down. Our top pick is M&M (BUY, TP Rs810).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
2Ws holding up better than 4Ws
In May-11, India’s car sales grew 9% YoY, 2Ws grew 14% YoY while CVs
grew 16% YoY. The sharp slowdown in growth over the last 2 months is inline
with the findings of our recent dealer survey which indicated significant
weakness in retail demand since Mar-11. 2Ws and goods LCVs were the only
segments to report double digit growth in May. We expect growth of 16%,
12% and 0% for cars, 2Ws and M&HCVs respectively in FY12; but there could
be downside to our estimates for cars and M&HCVs. We see a tough year
ahead for auto stocks given the weak demand environment. 2012 might be a
better year if interest rates start going down and demand recovers. M&M
remains our top 12m pick but 2Ws might be a better near-term defensive.
Cars & UVs: Single digit growth rates in May; see downside to estimates
q Domestic car sales rose just 9% YoY in May-11. YTD growth stands at 12%.
q The sharp slowdown in growth over the last 2 months is in-line with the findings of
our recent dealer survey where we observed a sharp increase in the number of
dealers reporting weakness in retail demand since Mar-11.
q We expect cars to grow at 16% in FY12 but now see downside to our estimate.
q Maruti’s gained 350bps MoM market share to 52% in May, primarily from Tata.
q UV sales grew just 6% YoY for the 2nd month in a row; M&M gained 240bps share.
CVs: Trucks growth down to 9% YoY; goods LCVs still strong
q Truck sales rose a modest 9% YoY in May. YTD growth stands at 7%. We expect
0% growth in FY12 post two years of 30%+ growth.
q Goods LCVs growth was still robust at 25% YoY in May-11.
q Tata gained share in trucks (from ALL) but lost share in goods LCVs (to M&M).
2Ws/3Ws: 2W growth holding up better but 3Ws slowing down
q 2W sales grew at 14% YoY in May-11 and are holding up better than 4W growth;
scooters growth slowed down sharply to 11% and is now lower than motorcycles.
q Hero Honda lost 300bps MoM market share as Bajaj regained share in May.
q Passenger 3W sales grew a modest 7% YoY in May; growth is slowing here as well.
Tough year ahead for auto stocks; favour M&M
q We see FY12 as a tough year for auto stocks given weakening demand, rising
competition and no respite in input cost pressures.
q 2Ws might be a better near-term defensive but we see limited absolute return
potential and are concerned on rising competition FY13 onwards; 4W stocks are
likely to remain languid near-term but might recover towards end-FY12 if interest
rates start moving down. Our top pick is M&M (BUY, TP Rs810).
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