UBS:: India Auto Sector July’11: PVs show negative growth

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UBS Investment Research
India Auto Sector
J uly’11: PVs show negative growth
􀂄 Passenger vehicles: All down sharply except M&M
Maruti volumes declined 25% YoY (-23%MoM). The vols. were lower by 17,000
units due to discontinuation of old Swift and shift of D’zire to Gurgaon from
Manesar. Adj. for the same domestic vols declined 7.5%YoY. Hyundai’s domestic
sales declined 11% YoY. Tata Motors reported a decline of 38%YoY for PVs with
cars down 43%YoY (incl. Nano which declined -64% YoY), and UVs (-2% YoY).
However, M&M UV sales grew 30% YoY.
􀂄 2Ws and Tractors: Steady growth continues
Hero Honda 2W sales grew 15%YoY (-4% MoM). TVS 2W domestic vols grew
14%YoY while 2W exports grew by 25%YoY. TVS 3W volumes recorded a
growth of +13% YoY on back of healthy exports. M&M domestic tractor
shipments grew at 16%YoY, while exports declined by 4% YoY.
􀂄 MHCV slows; LCVs - strong growth continues, M&M up sharply
Tata Motor’s LCV shipments grew 22%YoY, while MHCV segment grew only by
4%YoY. M&M LCVs (4-W pick ups) recorded a strong growth of 91%YoY (up
48%YoY FY12ytd).
􀂄 Preferred picks: Hero Honda, Maruti and M&M
We like Hero Honda and M&M as key beneficiaries of strong growth in rural
demand. We like Maruti as we believe margins have bottomed and valuations are
cheap.