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Automobiles
India
Mixed trends. Auto volumes for October 2011 were mixed. Passenger car volumes
were weak in October while commercial vehicle and tractor volumes remained buoyant.
Maruti Suzuki volumes declined significantly due to strikes at their plants while tractor
volume growth for M&M surprised positively. We advise investors to remain selective in
the sector. Our key BUY recommendations in the sector are Mahindra & Mahindra and
Maruti.
Hero Motocorp reported 1% yoy growth in volumes in October
Hero Motocorp reported 1% yoy growth in volumes in October 2011 as the company corrected
the inventory levels. The company recorded over 650,000 units of retail volumes (highest in the
company’s history) in October but dealer dispatches were significantly lower, indicating that the
company had built in high inventory levels ahead of the festive season. We estimate Hero
Motocorp’s volumes to grow 11% yoy during the November-March 2012 period, which implies a
run rate of 527,000 units/month.
Maruti reported 53% yoy decline in domestic volumes
Maruti Suzuki reported 53% yoy decline in volumes impacted by the strikes at the Manesar and
Gurgaon plants. Maruti lost close to 40,000 units in production volumes in October 2011 due to
the strikes at its plants. The strikes have ended as the workers have agreed to sign the ’good
conduct bond‘ and production is expected to normalize by end of December 2011 to pre-strike
levels. Hyundai reported 5% yoy decline in domestic volumes while Maruti Suzuki indicated retail
volumes for Diwali were up by 2% yoy. Maruti Suzuki’s inventory levels have declined to 2-3
weeks from 4-5 weeks earlier after the strikes.
Mahindra tractor volumes surprised positively
Mahindra & Mahindra posted 25% yoy growth in volumes, boosted by strong growth of Maxximo
+ Gio (+41% yoy) and tractor volumes (+31% yoy). Passenger UVs (including pick-ups) volume
growth moderated to 7% yoy due to a strong base effect. We expect M&M’s volume growth to
moderate in 2HFY12E due to the stiff base effect.
Tata Motors’ numbers were below expectations (+5% yoy growth) in October 2011 driven by
weak growth in LCV. Domestic MHCV volumes reported 23% yoy growth while domestic LCV
volumes posted 6% yoy growth. Passenger vehicle volumes grew by 3% yoy boosted by 23% yoy
growth in utility vehicle volumes and 11% yoy growth in Indica volumes (aided by launch of the
new Indica Vista). Nano volumes reported an improvement (+26% yoy growth). Indigo volumes
declined by 24% yoy.
We expect 5% increase in Maruti Suzuki volumes between November and March 2012 driven by
new model launches and increase in diesel engine capacity, while we expect M&M and Tata
Motors to report 8% and 6% yoy growth in volumes in the November-March 2012 period.
We maintain our positive view on M&M and Maruti Suzuki
We believe passenger car volume growth is likely to remain muted over 2HFY12E while we expect
two-wheeler and commercial vehicle volume growth to moderate as well in 2HFY12E. We expect
raw material costs to remain stable in 2HFY12E, which is likely to keep auto companies’ margin
stable. We maintain our positive view on M&M and Maruti Suzuki due to attractive valuations.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Automobiles
India
Mixed trends. Auto volumes for October 2011 were mixed. Passenger car volumes
were weak in October while commercial vehicle and tractor volumes remained buoyant.
Maruti Suzuki volumes declined significantly due to strikes at their plants while tractor
volume growth for M&M surprised positively. We advise investors to remain selective in
the sector. Our key BUY recommendations in the sector are Mahindra & Mahindra and
Maruti.
Hero Motocorp reported 1% yoy growth in volumes in October
Hero Motocorp reported 1% yoy growth in volumes in October 2011 as the company corrected
the inventory levels. The company recorded over 650,000 units of retail volumes (highest in the
company’s history) in October but dealer dispatches were significantly lower, indicating that the
company had built in high inventory levels ahead of the festive season. We estimate Hero
Motocorp’s volumes to grow 11% yoy during the November-March 2012 period, which implies a
run rate of 527,000 units/month.
Maruti reported 53% yoy decline in domestic volumes
Maruti Suzuki reported 53% yoy decline in volumes impacted by the strikes at the Manesar and
Gurgaon plants. Maruti lost close to 40,000 units in production volumes in October 2011 due to
the strikes at its plants. The strikes have ended as the workers have agreed to sign the ’good
conduct bond‘ and production is expected to normalize by end of December 2011 to pre-strike
levels. Hyundai reported 5% yoy decline in domestic volumes while Maruti Suzuki indicated retail
volumes for Diwali were up by 2% yoy. Maruti Suzuki’s inventory levels have declined to 2-3
weeks from 4-5 weeks earlier after the strikes.
Mahindra tractor volumes surprised positively
Mahindra & Mahindra posted 25% yoy growth in volumes, boosted by strong growth of Maxximo
+ Gio (+41% yoy) and tractor volumes (+31% yoy). Passenger UVs (including pick-ups) volume
growth moderated to 7% yoy due to a strong base effect. We expect M&M’s volume growth to
moderate in 2HFY12E due to the stiff base effect.
Tata Motors’ numbers were below expectations (+5% yoy growth) in October 2011 driven by
weak growth in LCV. Domestic MHCV volumes reported 23% yoy growth while domestic LCV
volumes posted 6% yoy growth. Passenger vehicle volumes grew by 3% yoy boosted by 23% yoy
growth in utility vehicle volumes and 11% yoy growth in Indica volumes (aided by launch of the
new Indica Vista). Nano volumes reported an improvement (+26% yoy growth). Indigo volumes
declined by 24% yoy.
We expect 5% increase in Maruti Suzuki volumes between November and March 2012 driven by
new model launches and increase in diesel engine capacity, while we expect M&M and Tata
Motors to report 8% and 6% yoy growth in volumes in the November-March 2012 period.
We maintain our positive view on M&M and Maruti Suzuki
We believe passenger car volume growth is likely to remain muted over 2HFY12E while we expect
two-wheeler and commercial vehicle volume growth to moderate as well in 2HFY12E. We expect
raw material costs to remain stable in 2HFY12E, which is likely to keep auto companies’ margin
stable. We maintain our positive view on M&M and Maruti Suzuki due to attractive valuations.
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