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For August month, Mahindra led the pack with 27% yoy growth followed by Hero
Motocorp(19%), Bajaj and Tata. Maruti for third month in a row recorded dip. With festival
period ahead, we feel system inventory will be high. Rural markets remain buoyant, whereas
discounts scale peak for cars to revive demand.
In August 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 rise mom in August.
In terms of surprises, Tata Motors total sales volume beat our estimate by 8.7% driven by
CV division. Maruti disappoints us by 6.3%, whereas Hero Honda, Mahindra and Bajaj is
inline. Bajaj volume scale historic high as per expectation.
Our channel checks indicate, select vehicle financiers raised rates by 25bps in August,
rest to follow suite soon.
With clubbing of festivals in September and October, the inventory build-up mode for
festivals is on and hence August company dispatches may not reflect true retail demand.
But it will be crucial to watch-out for dealer incentive around festivals in October to check
the health of retail demand.
In the rising oil price and finance rate trend, our Buys in the sector are Hero Motocorp,
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
Tata Motors - Strong M&HCV growth of 12.5% yoy and 5.5% mom impressed us. LCV
sustained their uptrend with 27% growth yoy. However, the sharp drop in cars (24.6%) and
exports (18.5%) concerns us. Domestic volume in total record 4% yoy and 9% mom. Overall
volumes were 8.7% better than our expectation.
Mahindra : Except 3-wheelers (+26% yoy and 18.5% mom), rest of segmental sales volume
performance is inline with our expectation. Tractors record impressive 23% yoy domestic
growth in August and 19.7% YTD growth is better than our FY12F estimate of 11.5%.
Improvement in rainfall in recent weeks is positive, but weak rainfall distribution pattern in the
country is a concern.
Maruti : for third month a row recorded decline in sales volume (-12.7%). The decline in
domestic market was much severe at 16.8%, which was negated by 18.5% yoy growth in
exports (first time in a year). The performance was 6.3% below expectation, which
management attributed entirely to Manesar labour trouble leading to production and sale loss.
Hero Motocorp : Led our auto sector coverage universe with 18.6% yoy growth to 503,654
vehicles. This is inline with our expectation.
Bajaj : Motorcycle sales volume clock historic highest with the support of strong export. Total
exports increased by 40% yoy but down 4% mom.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
For August month, Mahindra led the pack with 27% yoy growth followed by Hero
Motocorp(19%), Bajaj and Tata. Maruti for third month in a row recorded dip. With festival
period ahead, we feel system inventory will be high. Rural markets remain buoyant, whereas
discounts scale peak for cars to revive demand.
In August 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 rise mom in August.
In terms of surprises, Tata Motors total sales volume beat our estimate by 8.7% driven by
CV division. Maruti disappoints us by 6.3%, whereas Hero Honda, Mahindra and Bajaj is
inline. Bajaj volume scale historic high as per expectation.
Our channel checks indicate, select vehicle financiers raised rates by 25bps in August,
rest to follow suite soon.
With clubbing of festivals in September and October, the inventory build-up mode for
festivals is on and hence August company dispatches may not reflect true retail demand.
But it will be crucial to watch-out for dealer incentive around festivals in October to check
the health of retail demand.
In the rising oil price and finance rate trend, our Buys in the sector are Hero Motocorp,
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
Tata Motors - Strong M&HCV growth of 12.5% yoy and 5.5% mom impressed us. LCV
sustained their uptrend with 27% growth yoy. However, the sharp drop in cars (24.6%) and
exports (18.5%) concerns us. Domestic volume in total record 4% yoy and 9% mom. Overall
volumes were 8.7% better than our expectation.
Mahindra : Except 3-wheelers (+26% yoy and 18.5% mom), rest of segmental sales volume
performance is inline with our expectation. Tractors record impressive 23% yoy domestic
growth in August and 19.7% YTD growth is better than our FY12F estimate of 11.5%.
Improvement in rainfall in recent weeks is positive, but weak rainfall distribution pattern in the
country is a concern.
Maruti : for third month a row recorded decline in sales volume (-12.7%). The decline in
domestic market was much severe at 16.8%, which was negated by 18.5% yoy growth in
exports (first time in a year). The performance was 6.3% below expectation, which
management attributed entirely to Manesar labour trouble leading to production and sale loss.
Hero Motocorp : Led our auto sector coverage universe with 18.6% yoy growth to 503,654
vehicles. This is inline with our expectation.
Bajaj : Motorcycle sales volume clock historic highest with the support of strong export. Total
exports increased by 40% yoy but down 4% mom.
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