India autos: Mar-15 volumes :Largely on expected lines: Nomura Research

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->
Mar-15 volumes: MHCV industry volumes remain strong; PV segment

on steady growth path while rural-focused segments remain under

pressure

Overall, the underlying demand trend in the Medium & Heavy Commercial

Vehicle (MHCV) and Passenger Vehicles (PV) segments remained strong in

Mar-15. MHCV industry volume increased by 22% y-y, largely in line with our

expectations. With this, the segment achieved 16% y-y growth in FY15. PV

industry volumes likely increased by ~4% y-y (NMR est: 8% growth) but this

was affected by steeper inventory reductions at Maruti. In our view, steady

growth in the segment continues – volumes grew by ~6% y-y in FY15.

However, demand in rural areas remains weak, which has had an impact on

volumes in the two-wheeler and tractor industries in particular. As per our

calculations, two-wheeler industry volumes declined by ~1% y-y – bike

volumes saw a high single-digit volume decline while scooter volume grew in

the high teens in March. In the tractor segment, M&M and Escorts’ combined

volumes declined by ~31% y-y.

Overall, we remain upbeat on a potentially strong volume growth recovery

across industry segments over the next two years and we reiterate our

preference for four-wheeler OEMs. Rural slowdown and unseasonal rains

could lead to weaker-than-expected growth in two wheelers and tractors in

FY16F. Our top picks in the sector are Maruti (MSIL IN, Buy), Eicher Motors

(EIM IN, Buy), Tata Motors (TTMT IN, Buy) and Ashok Leyland (AL IN, Buy).

Passenger vehicle industry volumes up ~4% in March

MSIL’s domestic volume rose by 1.4% y-y as compared to our forecast of

14% growth. However, as per our discussions with the management, the

company has reduced inventory levels by ~30,000 units, which has led to

lower dispatches. Current inventory levels are below the normal levels of ~4

weeks. Despite higher base effect (Mar-14 retails were up 20% y-y as excise

rates were cut by 4% in Feb), retail volume was flattish y-y. The company is

confident it can achieve double-digit volume growth (~10%) in FY16F. For

M&M, PV volume declined by 10% y-y, slightly better than our estimate of a

13% y-y decline. For TTMT, PV volume was up ~9% y-y led by the strong

initial response to the Zest and Bolt models.

Among unlisted OEMs, Honda, Hyundai and Toyota reported strong double-
digit volume growth. VW reported 22% y-y volume growth partly due to a low

base effect (volume down 42% y-y in Mar-14). While OEMs like GM, Nissan

and Ford continued to see double-digit volume declines in March.

Another strong month for MHCV industry – volumes up ~22% y-y

As per our calculations, MHCV industry volumes were quite strong and

increased by 22% y-y in March. In terms of OEMs, AL’s volume was up 30%

y-y, TTMT’s volume increased by 20% y-y, while Eicher’s domestic MHCV

volume was up ~10% y-y.

LCV industry volumes remained weak and declined by ~15% y-y – largely in

line with our expectations.