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India Equity Research Reports, IPO and Stock News
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Automobiles
India
Demand holding up fairly well. February auto sales surpassed our expectations. Key
highlights were (1) Hero Honda continues to post strong volume growth and retain its
market share, (2) Maruti A3 segment volumes increased by 9% mom which is positive
for margins, (3) Mahindra tractor volumes continue to surprise on the upside and (4)
commercial vehicle volumes have softened a bit mom. We see slight upside risk to our
volume estimates for Mahindra & Mahindra and Hero Honda.
2-wheeler volumes continue to surprise
Two-wheeler volumes for Hero Honda and TVS Motors were up 24% yoy aided by the marriage
season in North India and some pre-buying due to expectations of a 2% hike in excise duty. Hero
Honda sales were up 1% mom while TVS Motors domestic motorcycle sales were down 2% mom.
Scooter segment sales were down by 1% mom while moped sales rose sharply by 15% mom for
TVS Motors.
Mahindra and Maruti sales remain buoyant
Mahindra sales surprised positively for second month in a row after a sharp bounce-back by
passenger utility vehicles (+12% yoy ) and robust growth in Maxximo & Gio volumes (+13% yoy).
Tractor sales were also robust (+37% yoy, down 7% mom) which bodes well for Mahindra’s
margins. The company plans to launch about 6-7 new variants of light commercial vehicles, a
variant of Xylo and a new SUV over the next 12-18 months which should keep volume growth
strong, in our view. Maruti Suzuki reported 16% yoy growth in total volumes slightly above
expectations. Domestic volumes were up 20% yoy but exports declined 15% yoy which dragged
down overall volume growth. Retail sales of Maruti for Feb 2011 were 93,000 vs. 80,000 in Jan
2011. Discounts are expected to decline qoq in 4QFY11E.
Tata Motors: Commercial vehicle sales softened a bit mom but passenger cars increased sharply
Medium commercial vehicle sales were flat mom better than our estimates. Passenger car volumes
rose sharply (15% yoy, 10% mom) driven by (1) Nano sales (8,202 units) boosted by lower finance
rates, Rs99 maintenance contract and a 4-year free warranty scheme, and (2) robust growth in
Indigo sales (grew by 22% yoy). Tata Motors had raised prices by Rs3,000-15,000 in passenger
vehicles and Rs1,500-30,000 in commercial vehicles on January 1 to offset raw material cost
pressures.
We see upside risks to M&M, Tata Motors and Hero Honda volume estimates
Mahindra & Mahindra tractor volume numbers for the past two months have exceeded our
expectations. The management indicated that supply issues have been sorted out and volumes
have improved sequentially. We see upside risk to our tractor volume estimates as M&M needs to
report a 13% yoy decline in volumes for Mar 2011 to achieve our volume estimates but we believe
demand is quite buoyant as of now and we don’t expect volume growth to decline in Mar 2011.
We also expect a 6% increase in our Hero Honda volume estimates. Mahindra & Mahindra is our
top pick in the sector.
Steel prices have increased by 15-20% over December 2010 and we expect automakers to
increase prices in April 2011 to partly offset material cost impact on margins. However, we believe
margins could come under pressure despite strong volume growth.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Automobiles
India
Demand holding up fairly well. February auto sales surpassed our expectations. Key
highlights were (1) Hero Honda continues to post strong volume growth and retain its
market share, (2) Maruti A3 segment volumes increased by 9% mom which is positive
for margins, (3) Mahindra tractor volumes continue to surprise on the upside and (4)
commercial vehicle volumes have softened a bit mom. We see slight upside risk to our
volume estimates for Mahindra & Mahindra and Hero Honda.
2-wheeler volumes continue to surprise
Two-wheeler volumes for Hero Honda and TVS Motors were up 24% yoy aided by the marriage
season in North India and some pre-buying due to expectations of a 2% hike in excise duty. Hero
Honda sales were up 1% mom while TVS Motors domestic motorcycle sales were down 2% mom.
Scooter segment sales were down by 1% mom while moped sales rose sharply by 15% mom for
TVS Motors.
Mahindra and Maruti sales remain buoyant
Mahindra sales surprised positively for second month in a row after a sharp bounce-back by
passenger utility vehicles (+12% yoy ) and robust growth in Maxximo & Gio volumes (+13% yoy).
Tractor sales were also robust (+37% yoy, down 7% mom) which bodes well for Mahindra’s
margins. The company plans to launch about 6-7 new variants of light commercial vehicles, a
variant of Xylo and a new SUV over the next 12-18 months which should keep volume growth
strong, in our view. Maruti Suzuki reported 16% yoy growth in total volumes slightly above
expectations. Domestic volumes were up 20% yoy but exports declined 15% yoy which dragged
down overall volume growth. Retail sales of Maruti for Feb 2011 were 93,000 vs. 80,000 in Jan
2011. Discounts are expected to decline qoq in 4QFY11E.
Tata Motors: Commercial vehicle sales softened a bit mom but passenger cars increased sharply
Medium commercial vehicle sales were flat mom better than our estimates. Passenger car volumes
rose sharply (15% yoy, 10% mom) driven by (1) Nano sales (8,202 units) boosted by lower finance
rates, Rs99 maintenance contract and a 4-year free warranty scheme, and (2) robust growth in
Indigo sales (grew by 22% yoy). Tata Motors had raised prices by Rs3,000-15,000 in passenger
vehicles and Rs1,500-30,000 in commercial vehicles on January 1 to offset raw material cost
pressures.
We see upside risks to M&M, Tata Motors and Hero Honda volume estimates
Mahindra & Mahindra tractor volume numbers for the past two months have exceeded our
expectations. The management indicated that supply issues have been sorted out and volumes
have improved sequentially. We see upside risk to our tractor volume estimates as M&M needs to
report a 13% yoy decline in volumes for Mar 2011 to achieve our volume estimates but we believe
demand is quite buoyant as of now and we don’t expect volume growth to decline in Mar 2011.
We also expect a 6% increase in our Hero Honda volume estimates. Mahindra & Mahindra is our
top pick in the sector.
Steel prices have increased by 15-20% over December 2010 and we expect automakers to
increase prices in April 2011 to partly offset material cost impact on margins. However, we believe
margins could come under pressure despite strong volume growth.
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