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AUTOMOBILE
Two wheelers and LCV's outperformed in the quarter gone by
Volumes for the auto manufacturers were impacted due to unfavorable macro factors.
Reserve Bank of India continued with the trend of raising key rates. Rising interest
rates had a negative bearing on M&HCV and passenger car sales whose exposure
to credit sales is relatively higher as against other segment slowing economy
too played a role in restricting M&HCV and passenger car sales. Increasing petrol
prices further dampened car demand during the quarter. Two wheeler sales remained
relatively less impacted because of 1.High cash sales 2.Rural exposure and
3.Better fuel efficiency. Accordingly, the 2W players posted YoY volume growth in
the range of 15-20%. LCV sales remained robust during the quarter which strong
demand coming in from rural India. Slowing car demand and month long strike at
one of its plants led to 20% YoY dip in volumes for Maruti. Ashok Leyland is expected
to report marginal YoY decline in volumes. Exports during the quarter remained
strong for majority of the companies. Duty Entitlement Pass Book (DEPB)
scheme came to an end this quarter and is replaced by less attractive duty draw
back scheme.
Reported net profit to come down both YoY and QoQ
We expect the reported net profit of companies under our auto coverage to decline
by 6.4% YoY and 3.7% QoQ. On YoY basis, we expect TVSM to report 15% jump
in reported PAT and QoQ we expect Ashok Leyland to report 63% increase in PAT.
Key points to watch out for…
n Ashok Leyland (ALL) - Unfavorable macro factors are impacting the company's
volumes. ALL's YTD volumes are down by 4%. Volume de-growth and high input
cost expected to keep margins lower YoY during the quarter.
n Bajaj Auto (BAL) - 2QFY11 was a strong one for the company on volumes front.
However, slowing premium segment sales and launch of entry level motorcycle
are expected to marginally impact the company's operating margin.
n Hero Moto Corp (HMC) - Volumes during the quarter grew at a rapid pace outperforming
its peers. Operating margins of the company have remained under
pressure for the past few quarters and we expect the same to continue on account
of re-branding related cost incurred during the quarter.
n TVS Motor (TVSM) - TVS Motors surprised last quarter with improvement in
their operating margins. With healthy volumes during 2QFY11, repeat of 1QFY11
margin performance will help the company post strong profits during the quarter.
n Maruti Suzuki India (MSIL) - For MSIL, 2QFY11 was a difficult one with strike
hampering production at the company's Manesar plant. We expect some impact
of the strike on the company's margin during the quarter under review.
n Escorts - After reporting a steep YoY decline in tractor sales in 3QFY11 (Sept
year end), the company's volumes in 4QFY11 have shown some recovery. However
the company's policy of completely expensing some cost during 4Q will
keep margins under pressure
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
AUTOMOBILE
Two wheelers and LCV's outperformed in the quarter gone by
Volumes for the auto manufacturers were impacted due to unfavorable macro factors.
Reserve Bank of India continued with the trend of raising key rates. Rising interest
rates had a negative bearing on M&HCV and passenger car sales whose exposure
to credit sales is relatively higher as against other segment slowing economy
too played a role in restricting M&HCV and passenger car sales. Increasing petrol
prices further dampened car demand during the quarter. Two wheeler sales remained
relatively less impacted because of 1.High cash sales 2.Rural exposure and
3.Better fuel efficiency. Accordingly, the 2W players posted YoY volume growth in
the range of 15-20%. LCV sales remained robust during the quarter which strong
demand coming in from rural India. Slowing car demand and month long strike at
one of its plants led to 20% YoY dip in volumes for Maruti. Ashok Leyland is expected
to report marginal YoY decline in volumes. Exports during the quarter remained
strong for majority of the companies. Duty Entitlement Pass Book (DEPB)
scheme came to an end this quarter and is replaced by less attractive duty draw
back scheme.
Reported net profit to come down both YoY and QoQ
We expect the reported net profit of companies under our auto coverage to decline
by 6.4% YoY and 3.7% QoQ. On YoY basis, we expect TVSM to report 15% jump
in reported PAT and QoQ we expect Ashok Leyland to report 63% increase in PAT.
Key points to watch out for…
n Ashok Leyland (ALL) - Unfavorable macro factors are impacting the company's
volumes. ALL's YTD volumes are down by 4%. Volume de-growth and high input
cost expected to keep margins lower YoY during the quarter.
n Bajaj Auto (BAL) - 2QFY11 was a strong one for the company on volumes front.
However, slowing premium segment sales and launch of entry level motorcycle
are expected to marginally impact the company's operating margin.
n Hero Moto Corp (HMC) - Volumes during the quarter grew at a rapid pace outperforming
its peers. Operating margins of the company have remained under
pressure for the past few quarters and we expect the same to continue on account
of re-branding related cost incurred during the quarter.
n TVS Motor (TVSM) - TVS Motors surprised last quarter with improvement in
their operating margins. With healthy volumes during 2QFY11, repeat of 1QFY11
margin performance will help the company post strong profits during the quarter.
n Maruti Suzuki India (MSIL) - For MSIL, 2QFY11 was a difficult one with strike
hampering production at the company's Manesar plant. We expect some impact
of the strike on the company's margin during the quarter under review.
n Escorts - After reporting a steep YoY decline in tractor sales in 3QFY11 (Sept
year end), the company's volumes in 4QFY11 have shown some recovery. However
the company's policy of completely expensing some cost during 4Q will
keep margins under pressure
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