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For July month, diversion in sales volume growth expanded further as Mahindra led the pack
with 32% yoy growth followed by Hero Honda (15%), whereas Maruti and Tata Motors record
sharp drop. With the recent RBI repo rate hike yet to be passed on to consumer, macro
headwinds remain tough for the sector.
In July month also, sales volume performance continued to favour rural market leaders
like Mahindra and Hero Honda, as they led in yoy growth. But urban market products like
car continue to reel under pressure for both Maruti and Tata Motor car division.
Incentives for cars continue to rise steeply, as July-Aug is traditionally weak months due
to monsoon impacting customer footfalls.
Mahindra automotive and Tata CV division surprise us by 8%, driven by small truck
sales. Hero Honda surprises us by 5%.
Pricing action seem to favour commercial vehicle sector in July - Tata Motors recorded
around 1.5% hike across CV models, Ashok Leyland around 1-2% across models, Eicher
around 1.5% across models.
The 9% diesel price increase taken during the last week of June hasn’t resulted in increased
freight rates, as they remained flat till the week ending July 23rd. We believe this to be a
matter of concern for the demand outlook of M&HCVs.
The recent 50bps hike in RBI repo and reverse repo rate hasn't been passed on to
consumers yet. Our channel checks suggest 25bps hike in vehicle finance rates soon, which
may dampen retail sentiment in coming weeks.
However, with clubbing of festivals in September and October, we feel dealer inventory
accumulation to start from August itself. Hence we expect wholesale volumes to be strong for
Aug-October. But it will be crucial to watch-out for dealer incentive around festivals in October
to check the health of retail demand.
In an environment of rising petrol prices, finance rates, our Buys in the sector are Hero
Honda, Mahindra and Tata Motor in that order. We remain cautious and maintain a Hold
rating on Maruti, Ashok Leyland and Sell on Bajaj Auto.
Details of company performance
Mahindra : recorded an impressive performance in domestic automotive division with 40.8%
yoy and 10.5% mom growth in sales volume. This was driven by 16.5% mom rise in small
truck sales to reach new historic high. For tractors, the sharp mom drop of 27% is seasonal in
nature.
Hero Honda : records impressive 14.8% yoy but 4.1% dip mom sales volume. This is 4.5%
better than our expectation.
Maruti : records sharp 25.3% yoy and 6.2% mom dip in sales volume. Adjusted for Swift
model change impact, sales volume dip is limited to 13%, which is inline with our expectation.
Management guidance to deliver the pending order of 38,000 Swift booking by mid-October,
should improve sales volume growth in coming months.
Tata Motors : Domestic CV division with 14.3% yoy and 3.9% mom growth continues to
surprise us. But a sharp dip in domestic car division (21.8% mom and 38.3% yoy) is a big
drag on overall performance.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
For July month, diversion in sales volume growth expanded further as Mahindra led the pack
with 32% yoy growth followed by Hero Honda (15%), whereas Maruti and Tata Motors record
sharp drop. With the recent RBI repo rate hike yet to be passed on to consumer, macro
headwinds remain tough for the sector.
In July month also, sales volume performance continued to favour rural market leaders
like Mahindra and Hero Honda, as they led in yoy growth. But urban market products like
car continue to reel under pressure for both Maruti and Tata Motor car division.
Incentives for cars continue to rise steeply, as July-Aug is traditionally weak months due
to monsoon impacting customer footfalls.
Mahindra automotive and Tata CV division surprise us by 8%, driven by small truck
sales. Hero Honda surprises us by 5%.
Pricing action seem to favour commercial vehicle sector in July - Tata Motors recorded
around 1.5% hike across CV models, Ashok Leyland around 1-2% across models, Eicher
around 1.5% across models.
The 9% diesel price increase taken during the last week of June hasn’t resulted in increased
freight rates, as they remained flat till the week ending July 23rd. We believe this to be a
matter of concern for the demand outlook of M&HCVs.
The recent 50bps hike in RBI repo and reverse repo rate hasn't been passed on to
consumers yet. Our channel checks suggest 25bps hike in vehicle finance rates soon, which
may dampen retail sentiment in coming weeks.
However, with clubbing of festivals in September and October, we feel dealer inventory
accumulation to start from August itself. Hence we expect wholesale volumes to be strong for
Aug-October. But it will be crucial to watch-out for dealer incentive around festivals in October
to check the health of retail demand.
In an environment of rising petrol prices, finance rates, our Buys in the sector are Hero
Honda, Mahindra and Tata Motor in that order. We remain cautious and maintain a Hold
rating on Maruti, Ashok Leyland and Sell on Bajaj Auto.
Details of company performance
Mahindra : recorded an impressive performance in domestic automotive division with 40.8%
yoy and 10.5% mom growth in sales volume. This was driven by 16.5% mom rise in small
truck sales to reach new historic high. For tractors, the sharp mom drop of 27% is seasonal in
nature.
Hero Honda : records impressive 14.8% yoy but 4.1% dip mom sales volume. This is 4.5%
better than our expectation.
Maruti : records sharp 25.3% yoy and 6.2% mom dip in sales volume. Adjusted for Swift
model change impact, sales volume dip is limited to 13%, which is inline with our expectation.
Management guidance to deliver the pending order of 38,000 Swift booking by mid-October,
should improve sales volume growth in coming months.
Tata Motors : Domestic CV division with 14.3% yoy and 3.9% mom growth continues to
surprise us. But a sharp dip in domestic car division (21.8% mom and 38.3% yoy) is a big
drag on overall performance.
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