Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Auto and auto ancillary
ƒ Sales marred by interest rates, fuel hikes & labour problems
Q2FY12 has moved in line with slowdown expectations for the auto
sector with overall growth at ~13% YoY. The industry continues to be
hit hard by rising interest rates (up 75 bps QoQ, 150 bps in H1) and fuel
costs (grew ~9% YoY). PV sales were among the worst hit with tepid
growth of ~3% YoY. The situation was worsened by the 33-day strike at
Maruti’s plant affecting volumes in excess of ~20,000 units. MHCV
segment volumes rose ahead of expectations at ~9% YoY even as they
reeled hardest against rising rates. The last mile transportation (LCVs),
two-wheeler sales remained unaffected with volume growth of ~36%,
~18% YoY, respectively. Tata Motors remains our top pick in the OEM
space as valuation comfort and JLR driven product launches are
expected to add traction in H2. We expect our OEM universe to register
topline growth of ~16% YoY for Q2FY12E.
ƒ Ancillaries face challenging times with slower replacement offtake
The replacement sales cycle has seen weaker offtake in the last two
quarters that has not helped ancillary players as OEM demand started to
wane in the same period. However, we expect the scenario in
replacement to improve from H2 onwards across segments like
batteries, tyres. Profit margins in Q2FY12E may improve~ 50 bps QoQ
(coverage universe) as input prices came off to a certain degree. We
prefer Exide Industries due to domestic auto-proxy play with stronger
replacement demand expected from two-wheeler sales and attractive
valuations. We expect our ancillary universe to post revenue growth of
~27% YoY in Q2FY12E.
ƒ Commodities come off somewhat but rupee turns spoilsport
The global jitters have provided some relief in terms of weakening input
prices as reflected in our RM-index (down in | terms~5% YoY).
Commodities like steel, aluminium and rubber have declined ~2-8%
YoY. However, currencies have played havoc in the market with INR
depreciating ~10% in September 2011. However, for exporters,
strengthening US$ is expected to be largely beneficial with better
realisations. We expect the I-direct coverage universe to reflect a jump
in EBITDA of 9.1% and PAT to decline 3.1% YoY
Company specific view
Company Remarks
Automotive Axle Revenue growth is estimated to remain flat sequentially (down 2.3% QoQ) due to
demand slowdown in the CV segment on account of rising interest rates. We expect a
minor improvement in the EBITDA margin leading to a YoY rise of ~74 bps at 12.6%
due to the ~5% decline in steel prices
Apollo Tyres Apollo has selectively raised prices in various product categories by ~5% YoY.
However, we expect ~4% QoQ volume decline in the domestic market. Input prices
on the rubber front have declined ~9% QoQ (| 210/kg), which would help raise
EBITDA margins QoQ by 110 bps ~at 9.1%
Bajaj Auto Volume growth at ~16% YoY was led by exports rise of (~39%). It could have been
higher but for interest rates, which hurt the 150 cc segment. We expect more inward
focus with the new Pulsar, Boxer for FY12E. We expect margins to improve QoQ by
20 bps to ~19.3% with better operating leverage
Balkrishna
Industries
The volume growth continues to be robust from the farm & off-highway segments.
We estimate revenues will grow ~28% YoY. The ~5% QoQ decline in rubber prices is
providing comfort although the rolling inventory cost is higher at ~$4.7/kg. The net
exposure has been prudently hedged at euro/INR-67
Bharat Forge The recent concerns on global demand have played out in the stock price. However
with 1/3rd of revenue diversified to non-auto we expect topline to grow ~22% YoY.
However, we expect EBITDA margins to trend slightly down ~30 bps QoQ to 24.0%
with higher other expenses
Escorts Tractor sales for Q4SY11 have been subdued (~9% YoY rise) due to higher growth in
non-penetrated areas like south and west India. Flexible priority sector lending rates
supported tractor sales across India. We have factored in managerial remuneration of
~10% of profits. Thus, PAT margin is expected to be at 2.3%
Exide The topline is expected to rise 13% YoY with sales push led through price cuts across
some select products in the wake of weak PV demand. However, going ahead, from
H2, the aftermarket sales ratio is expected to go up to ~1.2:1 from 1.1:1. We expect
EBITDA margins to remain flat QoQ at ~17.8% level
Hero MotoCorp The executive segment continued to witness volumes outburst at 1.5 million units
(~18% YoY growth) as the segment remained insulated from high interest rates. On
the EBITDA and PAT front, we expect margins to shrink 60 and 80 bps QoQ due to
rising re-branding and R&D costs along with higher tax rate
JK Tyre Sales saw a slowdown in the PV space. However, better CV sales are expected to
fuel topline growth of ~24% YoY. JK Tyres witnessed a tough challenge in Q1FY12
with barely positive PAT and, thus, raised prices in select offerings by ~2%.
Softening of NR prices by ~9% would raise PAT margin to 1.0%
M&M Domestic auto sales led by the four-wheeler LCV/pick-up segment have grown ~31%,
overall ~ 32% YoY at ~1.2 lakh units. Rural demand led tractor sales grew 26% YoY
to 57,394 units. Even as the EBITDA margin could improve ~20 bps QoQ to 13.6%,
the PAT decline YoY was mainly due to | 118 crore YoY exceptional gain
Maruti Suzuki Volumes dipped ~20% YoY by 2.5 lakh units partially through demand slowdown with
a 75 bps rise in interest rates and primarily through 33-day labour strike leading to
loss of more than 20,000 units. Higher fixed costs and currency exposure could lead
to EBITDA margin decline of ~70 bps QoQ
Motherson Sumi Higher content per car has led to strong domestic growth even with PV sales
slowdown. We expect standalone sales to grow ~15% YoY and SMR to grow ~20%
YoY with start of supply pre-orders. With the presence of certain one-off items in Q1
and lower copper prices, EBITDA margins could rise ~40 bps QoQ
Subros Topline growth is expected to be sluggish (down~4% QoQ.) with key clients like
Maruti and Tata Motors witnessing a slowdown in PV volumes. The PAT margin is
expected to remain flat sequentially at ~3.0% (up 120 bps YoY)
Tata Motors Domestic fall in PV sales (~22% YoY) is largely driven by weak Nano (ex-Nano sales
flat YoY). CV sales were ahead of expectations ~22% YoY. JLR volumes may have
grown ~15% YoY post Evoque launch, ASP* jump of ~7% YoY with more China
mix.On consolidated basis, we expect sales growth of ~22%, PAT to remain flat YoY
Source: Company, ICICIdirect.com Research
Click on link below for details of all sectors
http://indiaer.blogspot.com/2011/10/q2fy12-result-preview-icici-securities.html
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Auto and auto ancillary
ƒ Sales marred by interest rates, fuel hikes & labour problems
Q2FY12 has moved in line with slowdown expectations for the auto
sector with overall growth at ~13% YoY. The industry continues to be
hit hard by rising interest rates (up 75 bps QoQ, 150 bps in H1) and fuel
costs (grew ~9% YoY). PV sales were among the worst hit with tepid
growth of ~3% YoY. The situation was worsened by the 33-day strike at
Maruti’s plant affecting volumes in excess of ~20,000 units. MHCV
segment volumes rose ahead of expectations at ~9% YoY even as they
reeled hardest against rising rates. The last mile transportation (LCVs),
two-wheeler sales remained unaffected with volume growth of ~36%,
~18% YoY, respectively. Tata Motors remains our top pick in the OEM
space as valuation comfort and JLR driven product launches are
expected to add traction in H2. We expect our OEM universe to register
topline growth of ~16% YoY for Q2FY12E.
ƒ Ancillaries face challenging times with slower replacement offtake
The replacement sales cycle has seen weaker offtake in the last two
quarters that has not helped ancillary players as OEM demand started to
wane in the same period. However, we expect the scenario in
replacement to improve from H2 onwards across segments like
batteries, tyres. Profit margins in Q2FY12E may improve~ 50 bps QoQ
(coverage universe) as input prices came off to a certain degree. We
prefer Exide Industries due to domestic auto-proxy play with stronger
replacement demand expected from two-wheeler sales and attractive
valuations. We expect our ancillary universe to post revenue growth of
~27% YoY in Q2FY12E.
ƒ Commodities come off somewhat but rupee turns spoilsport
The global jitters have provided some relief in terms of weakening input
prices as reflected in our RM-index (down in | terms~5% YoY).
Commodities like steel, aluminium and rubber have declined ~2-8%
YoY. However, currencies have played havoc in the market with INR
depreciating ~10% in September 2011. However, for exporters,
strengthening US$ is expected to be largely beneficial with better
realisations. We expect the I-direct coverage universe to reflect a jump
in EBITDA of 9.1% and PAT to decline 3.1% YoY
Company specific view
Company Remarks
Automotive Axle Revenue growth is estimated to remain flat sequentially (down 2.3% QoQ) due to
demand slowdown in the CV segment on account of rising interest rates. We expect a
minor improvement in the EBITDA margin leading to a YoY rise of ~74 bps at 12.6%
due to the ~5% decline in steel prices
Apollo Tyres Apollo has selectively raised prices in various product categories by ~5% YoY.
However, we expect ~4% QoQ volume decline in the domestic market. Input prices
on the rubber front have declined ~9% QoQ (| 210/kg), which would help raise
EBITDA margins QoQ by 110 bps ~at 9.1%
Bajaj Auto Volume growth at ~16% YoY was led by exports rise of (~39%). It could have been
higher but for interest rates, which hurt the 150 cc segment. We expect more inward
focus with the new Pulsar, Boxer for FY12E. We expect margins to improve QoQ by
20 bps to ~19.3% with better operating leverage
Balkrishna
Industries
The volume growth continues to be robust from the farm & off-highway segments.
We estimate revenues will grow ~28% YoY. The ~5% QoQ decline in rubber prices is
providing comfort although the rolling inventory cost is higher at ~$4.7/kg. The net
exposure has been prudently hedged at euro/INR-67
Bharat Forge The recent concerns on global demand have played out in the stock price. However
with 1/3rd of revenue diversified to non-auto we expect topline to grow ~22% YoY.
However, we expect EBITDA margins to trend slightly down ~30 bps QoQ to 24.0%
with higher other expenses
Escorts Tractor sales for Q4SY11 have been subdued (~9% YoY rise) due to higher growth in
non-penetrated areas like south and west India. Flexible priority sector lending rates
supported tractor sales across India. We have factored in managerial remuneration of
~10% of profits. Thus, PAT margin is expected to be at 2.3%
Exide The topline is expected to rise 13% YoY with sales push led through price cuts across
some select products in the wake of weak PV demand. However, going ahead, from
H2, the aftermarket sales ratio is expected to go up to ~1.2:1 from 1.1:1. We expect
EBITDA margins to remain flat QoQ at ~17.8% level
Hero MotoCorp The executive segment continued to witness volumes outburst at 1.5 million units
(~18% YoY growth) as the segment remained insulated from high interest rates. On
the EBITDA and PAT front, we expect margins to shrink 60 and 80 bps QoQ due to
rising re-branding and R&D costs along with higher tax rate
JK Tyre Sales saw a slowdown in the PV space. However, better CV sales are expected to
fuel topline growth of ~24% YoY. JK Tyres witnessed a tough challenge in Q1FY12
with barely positive PAT and, thus, raised prices in select offerings by ~2%.
Softening of NR prices by ~9% would raise PAT margin to 1.0%
M&M Domestic auto sales led by the four-wheeler LCV/pick-up segment have grown ~31%,
overall ~ 32% YoY at ~1.2 lakh units. Rural demand led tractor sales grew 26% YoY
to 57,394 units. Even as the EBITDA margin could improve ~20 bps QoQ to 13.6%,
the PAT decline YoY was mainly due to | 118 crore YoY exceptional gain
Maruti Suzuki Volumes dipped ~20% YoY by 2.5 lakh units partially through demand slowdown with
a 75 bps rise in interest rates and primarily through 33-day labour strike leading to
loss of more than 20,000 units. Higher fixed costs and currency exposure could lead
to EBITDA margin decline of ~70 bps QoQ
Motherson Sumi Higher content per car has led to strong domestic growth even with PV sales
slowdown. We expect standalone sales to grow ~15% YoY and SMR to grow ~20%
YoY with start of supply pre-orders. With the presence of certain one-off items in Q1
and lower copper prices, EBITDA margins could rise ~40 bps QoQ
Subros Topline growth is expected to be sluggish (down~4% QoQ.) with key clients like
Maruti and Tata Motors witnessing a slowdown in PV volumes. The PAT margin is
expected to remain flat sequentially at ~3.0% (up 120 bps YoY)
Tata Motors Domestic fall in PV sales (~22% YoY) is largely driven by weak Nano (ex-Nano sales
flat YoY). CV sales were ahead of expectations ~22% YoY. JLR volumes may have
grown ~15% YoY post Evoque launch, ASP* jump of ~7% YoY with more China
mix.On consolidated basis, we expect sales growth of ~22%, PAT to remain flat YoY
Source: Company, ICICIdirect.com Research
Click on link below for details of all sectors
Q2FY12 Result Preview:: ICICI Securities,
http://indiaer.blogspot.com/2011/10/q2fy12-result-preview-icici-securities.html
No comments:
Post a Comment