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Festival season blues
India Reality Research’s (IRR) Oct survey of car dealers throws up
multiple negative data points for Maruti. Most dealers are not hopeful of
the 2011 festival season being better than 2010, with Maruti dealers
being the most pessimistic. The recent launches – Honda ‘Brio’ and
Hyundai ‘Eon’ – are seeing strong demand. IRR also found evidence of
Maruti’s ‘Swift’ customers moving to Ford and GM due to the excessively
long waiting list for the ‘Swift’. M&M’s ‘XUV500’ is seeing very strong
response. We retain U-PF on Maruti and BUY on M&M.
Oct sales better than Sep but not as good as last year
q In IRR’s Oct survey of car dealers, a majority of dealers said that they expect
better demand in Oct Vs Sep. This is not surprising since Sep coincided with an
inauspicious period in India while Oct is the peak festival season month.
q However, 47% of dealers said that they expect this festival season to be weaker
than last year.
q Dealers of Maruti and Hyundai were the most pessimistic of the dealers surveyed.
q Discounts have risen in Oct for most companies and more so on petrol models.
Recent launches by competition getting a good response
q IRR found that dealers of Hyundai and Honda are seeing strong initial demand for
the recently launched ‘Eon’ and the ‘Brio’ respectively.
q Interestingly, dealers of Maruti were of the opinion that customers will not switch
from the higher-CC ‘Alto K10’ to the lower CC ‘Eon’. If this thesis does pan out then
Eon might not have that much of an impact on Maruti.
q The strongest response has been seen by M&M’s ‘XUV500’ where demand is fast
outstripping supply.
Long waiting list hurting Maruti
q IRR found that GM and Ford are benefiting from the prolonged strike at Maruti’s
plant. With the waiting list for the ‘Swift’ stretching to 6m or more, customers are
moving to other diesel small cars like GM ‘Beat’ and Ford ‘Figo’.
Maintain U-PF on Maruti and BUY on M&M
q Despite the YTD underperformance, we believe that Maruti’s stock price does not
fully reflect the negatives of slowing industry growth, rising competition and
diminishing pricing and expect street estimates to head lower post 2Q results.
q M&M remain our top pick and we see it continuing to benefit from strong industry
growth, new product tailwinds and minimal incremental competition in 2H.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Festival season blues
India Reality Research’s (IRR) Oct survey of car dealers throws up
multiple negative data points for Maruti. Most dealers are not hopeful of
the 2011 festival season being better than 2010, with Maruti dealers
being the most pessimistic. The recent launches – Honda ‘Brio’ and
Hyundai ‘Eon’ – are seeing strong demand. IRR also found evidence of
Maruti’s ‘Swift’ customers moving to Ford and GM due to the excessively
long waiting list for the ‘Swift’. M&M’s ‘XUV500’ is seeing very strong
response. We retain U-PF on Maruti and BUY on M&M.
Oct sales better than Sep but not as good as last year
q In IRR’s Oct survey of car dealers, a majority of dealers said that they expect
better demand in Oct Vs Sep. This is not surprising since Sep coincided with an
inauspicious period in India while Oct is the peak festival season month.
q However, 47% of dealers said that they expect this festival season to be weaker
than last year.
q Dealers of Maruti and Hyundai were the most pessimistic of the dealers surveyed.
q Discounts have risen in Oct for most companies and more so on petrol models.
Recent launches by competition getting a good response
q IRR found that dealers of Hyundai and Honda are seeing strong initial demand for
the recently launched ‘Eon’ and the ‘Brio’ respectively.
q Interestingly, dealers of Maruti were of the opinion that customers will not switch
from the higher-CC ‘Alto K10’ to the lower CC ‘Eon’. If this thesis does pan out then
Eon might not have that much of an impact on Maruti.
q The strongest response has been seen by M&M’s ‘XUV500’ where demand is fast
outstripping supply.
Long waiting list hurting Maruti
q IRR found that GM and Ford are benefiting from the prolonged strike at Maruti’s
plant. With the waiting list for the ‘Swift’ stretching to 6m or more, customers are
moving to other diesel small cars like GM ‘Beat’ and Ford ‘Figo’.
Maintain U-PF on Maruti and BUY on M&M
q Despite the YTD underperformance, we believe that Maruti’s stock price does not
fully reflect the negatives of slowing industry growth, rising competition and
diminishing pricing and expect street estimates to head lower post 2Q results.
q M&M remain our top pick and we see it continuing to benefit from strong industry
growth, new product tailwinds and minimal incremental competition in 2H.
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