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India Equity Research Reports, IPO and Stock News
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Our interaction with industry experts suggests that LCV Goods segment is likely to
grow at 25-26%, whereas M&HCV Goods segment can grow at 6-7% in FY12E.
According to our assessment, it is unlikely that M&HCV Goods space will see a
negative growth, whereas LCV segment is likely to grow in 12-15% range in FY13E.
According to IFTRT report, the ensuing 2 months of February and March 2012 should
witness increased sale volumes because the fleet owners are making extra
purchases due to tax benefit of 50% depreciation allowance under the Income Tax
Act and hefty discounts on purchase offered by Commercial Vehicle dealers in the
country. Key findings of the IFTRT report are mentioned below:
Freight offering continues to be robust: According to IFTRT report, Truck
Rentals during January 2012 moved up by 2.5% - 3% on trunk routes with strong
cargo offerings from agri-products led by an increase of 30%-35% in arrival of
fresh fruit and vegetables in the APMCs, healthy increased 10%-15% movement
of food grain and cereal items coupled with improvement in cargo offerings by
8%-10% from manufacturing sector. Currently availability of freight is not an
issue as there is no situation where vehicles are standing idle.
Freight rates increase by 10.8%‐17.8% during April‐Dec’11: The cargo offerings
from the manufacturing sector grew at a lower average rate of 5% - 6% for April-
Dec 2011 period, however the food grain, cereals and edible oils offered 10%-
11% extra cargo all through last three quarters and the fresh fruit and
vegetables during October - December 2011 displayed 20%-25% extra arrival in
comparison to the previous quarter in the same fiscal. This led to higher fleet
utilization and increase in the truck rentals on the trunk routes by 10.8% to
17.8% during April - Dec 2011. (Exhibit 4&5).
CV Goods segment still growing at a brisk pace of 21.2%: Industry Truck sales
(LCV & MHCV Goods segment) grew by 21.2% during April-January 2012 over
the same period last year due to steady cargo availability and higher truck
rentals to transport operators. For YTD FY12, LCV goods segment grew by 29.0%
YoY, whereas M&HCV goods segment (7.5-40T) grew by 11.9% YoY. (Exhibit 6).
February and March’12 volumes likely to improve: According to IFTRT report,
the current quarter of this fiscal has started with double digit growth (13.8%) in
Jan 2012 for Goods segment (M&HCV and LCV) and the last 2 months of
February and March 2012 should witness even increased sale volumes because
the fleet owners are making extra purchases due to tax benefit of 50%
depreciation allowance under the Income Tax Act and convenient low cost auto
finance schemes coupled with hefty discounts on purchase offered by
Commercial Vehicle dealers in the country. The overall cargo offerings are
expected to be buoyant in next couple of months leading to additional demand
for fleet replacement and expansion.
Demand for younger fleet to drive FY13E growth : The corporate as well as PSU
consignors are nowadays seeking younger truck fleet for their transport
contracts thereby leading to a voluntary scrappage of very old truck fleet. This
trend has gained momentum in last couple of years which increases the
ultimate demand for new trucks.
Trend towards contractual basis ‐ a positive for the industry: The truck freight
market has seen a positive development in the last five years in which the longterm
contractual transport business has grown up to 25-30% over 5-10% of the
total freight volume. Also, these transport contracts duly carry escalation clause
in the contracts to give transport contractor a reflection in freight charges of the
pro-rata increase in diesel price change on every occasion, thereby, hedging the
risk of lower profitability.
LCV goods segment market share improves by 12.5% in the last 4 years: The
need for Hub and Spoke model has fuelled growth in the LCV Goods segment
which has grown at a brisk pace of 20.9% CAGR for FY08-FY12E as against a 2.8%
CAGR in the M&HCV Goods segment. Agriculture sector is driving growth in the
small and medium Commercial Vehicles. As a result of robust growth, LCV
segment now accounts for 53.5% of the total Commercial Vehicles – Goods
segment, an increase of 12.5% over FY08 levels.
Newer players gaining Market Share: Relatively newer players in the M&HCV
Goods segment are gaining market share and are likely to grow at a faster clip.
Both Volvo-Eicher Commercial Vehicles (VECV) and Asia Motor Works (AMW)
gained 90bps in Market Share for YTD FY12 to 11.1% and 3.4% respectively. Pan-
India presence led to an 11.6% YoY growth for Tata Motors, whereas overdependence
on South led to flattish sales for Ashok Leyland in the M&HCV
Goods segment.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Our interaction with industry experts suggests that LCV Goods segment is likely to
grow at 25-26%, whereas M&HCV Goods segment can grow at 6-7% in FY12E.
According to our assessment, it is unlikely that M&HCV Goods space will see a
negative growth, whereas LCV segment is likely to grow in 12-15% range in FY13E.
According to IFTRT report, the ensuing 2 months of February and March 2012 should
witness increased sale volumes because the fleet owners are making extra
purchases due to tax benefit of 50% depreciation allowance under the Income Tax
Act and hefty discounts on purchase offered by Commercial Vehicle dealers in the
country. Key findings of the IFTRT report are mentioned below:
Freight offering continues to be robust: According to IFTRT report, Truck
Rentals during January 2012 moved up by 2.5% - 3% on trunk routes with strong
cargo offerings from agri-products led by an increase of 30%-35% in arrival of
fresh fruit and vegetables in the APMCs, healthy increased 10%-15% movement
of food grain and cereal items coupled with improvement in cargo offerings by
8%-10% from manufacturing sector. Currently availability of freight is not an
issue as there is no situation where vehicles are standing idle.
Freight rates increase by 10.8%‐17.8% during April‐Dec’11: The cargo offerings
from the manufacturing sector grew at a lower average rate of 5% - 6% for April-
Dec 2011 period, however the food grain, cereals and edible oils offered 10%-
11% extra cargo all through last three quarters and the fresh fruit and
vegetables during October - December 2011 displayed 20%-25% extra arrival in
comparison to the previous quarter in the same fiscal. This led to higher fleet
utilization and increase in the truck rentals on the trunk routes by 10.8% to
17.8% during April - Dec 2011. (Exhibit 4&5).
CV Goods segment still growing at a brisk pace of 21.2%: Industry Truck sales
(LCV & MHCV Goods segment) grew by 21.2% during April-January 2012 over
the same period last year due to steady cargo availability and higher truck
rentals to transport operators. For YTD FY12, LCV goods segment grew by 29.0%
YoY, whereas M&HCV goods segment (7.5-40T) grew by 11.9% YoY. (Exhibit 6).
February and March’12 volumes likely to improve: According to IFTRT report,
the current quarter of this fiscal has started with double digit growth (13.8%) in
Jan 2012 for Goods segment (M&HCV and LCV) and the last 2 months of
February and March 2012 should witness even increased sale volumes because
the fleet owners are making extra purchases due to tax benefit of 50%
depreciation allowance under the Income Tax Act and convenient low cost auto
finance schemes coupled with hefty discounts on purchase offered by
Commercial Vehicle dealers in the country. The overall cargo offerings are
expected to be buoyant in next couple of months leading to additional demand
for fleet replacement and expansion.
Demand for younger fleet to drive FY13E growth : The corporate as well as PSU
consignors are nowadays seeking younger truck fleet for their transport
contracts thereby leading to a voluntary scrappage of very old truck fleet. This
trend has gained momentum in last couple of years which increases the
ultimate demand for new trucks.
Trend towards contractual basis ‐ a positive for the industry: The truck freight
market has seen a positive development in the last five years in which the longterm
contractual transport business has grown up to 25-30% over 5-10% of the
total freight volume. Also, these transport contracts duly carry escalation clause
in the contracts to give transport contractor a reflection in freight charges of the
pro-rata increase in diesel price change on every occasion, thereby, hedging the
risk of lower profitability.
LCV goods segment market share improves by 12.5% in the last 4 years: The
need for Hub and Spoke model has fuelled growth in the LCV Goods segment
which has grown at a brisk pace of 20.9% CAGR for FY08-FY12E as against a 2.8%
CAGR in the M&HCV Goods segment. Agriculture sector is driving growth in the
small and medium Commercial Vehicles. As a result of robust growth, LCV
segment now accounts for 53.5% of the total Commercial Vehicles – Goods
segment, an increase of 12.5% over FY08 levels.
Newer players gaining Market Share: Relatively newer players in the M&HCV
Goods segment are gaining market share and are likely to grow at a faster clip.
Both Volvo-Eicher Commercial Vehicles (VECV) and Asia Motor Works (AMW)
gained 90bps in Market Share for YTD FY12 to 11.1% and 3.4% respectively. Pan-
India presence led to an 11.6% YoY growth for Tata Motors, whereas overdependence
on South led to flattish sales for Ashok Leyland in the M&HCV
Goods segment.
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