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Archive for October 4th, 2011

CVs and 2Ws celebrate, PVs not doing great

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With the onset of festive season in the month of October, September has shown good signs of robust sales performances from CV and two wheeler space. Companies like Hero Motocorp, Bajaj Auto and TVS all have put up record breaking sales performances in September. Despite the inauspicious period of shradh paksha, the two wheeler sales refused to show any signs of softening. On the CV side as well, unexpected jumps were seen in this month as M&M and Tata Motors posted good sales numbers. Troubled by its ongoing labor issues, rising competition, rising fuel costs and interest rates, Maruti Suzuki has posted a fall in volumes again for four straight months .


Bajaj Auto – (TP – Rs1,647, BUY) – Crossed the 2mn mark in H1!

Bajaj Auto has posted a record performance in September by selling 4.17 lakh units, a growth of 18% yoy and 9% mom. This has been the second month post the launch of 150cc Boxer, which sold 10,000 units and helped the company to achieve the 4 lakh mark a month. The twin brands Pulsar and Discover reported strong growth and contributed about 67% of total motorcycle sales. The company has recorded highest ever motor cycle sales thus indicating that the 2Wheeler sector is insulated from any macro headwinds. Three wheeler sales came in at 46,478 units, a growth of 18% yoy, 5% up mom. Opening up of permits in 4-5 states will help the company to sell a significant amount of 3Wheelers in the coming months. On the export side, Bajaj Auto sold 1.41 lakh units, a growth of 39% yoy and contributed 34% of sales v/s 29% yoy, which indicates a better profitability in the month. For the first half of the year, the company reported 17% yoy growth to cross the 2.2 mn mark.


Hero Motocorp – (TP – Rs1,560, SELL) – Breaking its own records

HMCL posted a record breaking volume performance in the month of September as it sold 5.49 lakh units v/s 4.33 lakh units, a growth of 27% in a festive environment. However with the stretched valuations, we believe that the stock is factoring all the expected positives like the upcoming production plant, foreign venture and improvement in margins on softening RM costs.


Mahindra and Mahindra – (TP- Rs 831, BUY) – Holding strong

M&M sold 40,168 units, a 23% growth yoy and 7% mom. UV sales in the month grew by 8% yoy to 17,887 units. 4W pick-up segment which includes Gio, Genio and Maxximo posted a robust 45% growth yoy as the LCV segment continued to grow at a strong pace. Verito has posted yet another stellar month with a growth of 56% yoy with sales recorded at 1,560 units , 9% mom decline v/s 1,710 units. Export sales moved up by 129% with traction seen in major export markets. Farm Equipment Segment (FES) posted a very robust growth of 41% yoy to 17,841 units, while sequentially they were up by 12% on continuation of good monsoon in September in various parts of the country producing a good crop. The festive launch of new SUV XUV500 priced in the range of Rs11-14 lakhs is expected to boost the UV sales


Maruti Suzuki – (TP – Rs 1,195, Underperformer)- Nothing to cheer about

Maruti Suzuki (MSIL) ‘s sales in September came at 85,565 units, a decline of whopping 20% yoy, while on mom basis it was down by 6% thus indicating slowdown in PV segment despite festive season. With the ongoing labor unrest, the company shifted Swift Dzire production to Gurgaon, while Swift, A Star and SX4 produced at Manesar are getting impacted. Along with the new Swift (-9.3% yoy) whose waiting period has shot up to 10 months, the slowdown has hit the vans segment as well where Eeco and Omni sales were down by 15% yoy. Exports were down by 48% yoy as A Star, the best selling exports model is facing the brunt of labor unrest at Manesar. Going forward, the recent and the expected hike in interest rate by RBI will lead to it getting passed to customers sooner or later, which will further impact demand. New launches from competitors and fuel price hikes will add fuel to this. Hence , we believe that Maruti will continue to underperform its peers and the auto industry over the next one year.


Tata Motors – (TP – Rs 172, BUY)- Festive demand lifts up sales across the board

September sales for the company were at 78,786 units,22% down yoy as well as mom. CV sales grew by 29% yoy, out of which LCV sales were up by 47% yoy and MHCV sales were 9% higher yoy. This reflects strong CV sales despite macro headwinds. PV segment sales showed some improvement in line with the festive demand by 6% yoy to 27,137 units while utility segment sales went up by 60% yoy.  Indica range reversed the trend by growing by 64% yoy as a new variant of Indica was launched in the last month.  Indigo range sales were also low by 11% yoy. Nano also underperformed, continuing its downward trajectory selling only 2,936 units, down 47% yoy , while on mom basis, Nano’s sales more than doubled on a lower base.


TVS Motor – (TP- Rs 66, BUY)- Three wheeler growth was the highlight, 2 wheelers post a stable growth

TVS sold 2.19 lakh units in September, a strong growth of 17% yoy, while on a mom basis it inched 13.5% up. Scooter sales grew by 30% on strong Wego sales, while motor cycles grew by 12% yoy despite Jive being a failure. Total domestic two wheelers grew by 16% yoy, while exports sailed by 27%. This growth indicates that the macro concerns have still not hit the two wheeler sector and TVS’s brands are showing a good demand. 3W sold 3,679 units up 14% yoy while the segment saw a 11% decline mom. Opening up of new 3W permits, expansion of 3W capacities from 6000 pm to 8000 pm  and launch of 2 new 2W will lead to a good traction in TVS sales going forward.


Written by Fundamental Side

October 4, 2011 at 12:12 pm