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http://www.kotaksecurities.com/pdf/dmb/MorningInsight10042012.pdf
AUTOMOBILE
Sluggish quarter for 2W, improvement in other segments
4QFY12 was a mixed bag with 2W volumes facing a slowdown and the car and
M&HCV segment posting some recovery. Conventionally, fourth quarter is one of
the better quarters for the automobile segment. After a post-festive season slowdown in third quarter, sales gather pace in the fourth quarter. However given various macro headwind like slowing economy, high interest rates and rising fuel prices
led to relatively dull performance (YoY) during the quarter under review. However
on a sequential basis the passenger car segment and the M&HCV segment displayed some improvement in demand.
Volumes
Q4 Q3 QoQ Q4 YoY
Company FY12 FY12 (%) FY11 (%)
Ashok Leyland 35,688 23,385 52.6 29,679 20.2
Bajaj Auto 1,017,167 1,075,441 (5.4) 948,198 7.3
Hero MotoCorp 1,572,027 1,589,286 (1.1) 1,454,431 8.1
Maruti Suzuki 360,334 239,528 50.4 343,340 4.9
TVS Motors 528,012 527,700 0.1 533,772 (1.1)
Source: Companies
Volumes for companies under coverage grew by 6% YoY and 1.7% QoQ. In the
quarter, 2W segment volumes remained under pressure. In the car segment, the
demand remained clearly in favor of diesel models with petrol run cars still facing
the heat of increase in petrol prices. Car sales in 4Q were fueled by anticipated hike
in excise duty in the budget. Finance Minister did increase the general rate of excise
but the expected additional excise duty on diesel vehicles did not come in the budget which came in as major relief for diesel car/UV makers. M&HCV segment performance in 4QFY12 was marked by difficult macro conditions. Tractor segment witnessed a sharp drop in demand in 4QFY12.
Revenues to grow in double digit
We expect the revenues for the companies under our coverage to grow by 11.2%
YoY in 4QFY12. Most of the companies under our coverage are expected to report
double digit revenue growth. Both volumes and price hikes will contribute towards
revenue growth for the companies. For Escorts, we expect revenues to de-grow due
to weak tractor demand during the quarter.
EBITDA margins to remain under pressure
With slowing demand and firm raw material prices, we expect the EBITDA margin to
largely remain under pressure. We do not see any significant change in margins as
compared to 3QFY12 as raw material prices remained firm in 4QFY12 and volume
growth was almost flat. MSIL's 3QFY12 performance was impacted due to strike at
the company's plant. But with production returning to normalcy, we expect the
margins to improve close to pre-strike levels. Ashok Leyland is also expected to report sequential margin improvement in a quarter which is traditionally strong for
M&HCV sales.
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