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Delay in festive season causes September sales to skid for most…

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Delay in festive season causes September sales to skid for most…

 September has been a good month for most of the auto companies (mainly the 4 wheelers) as they have started getting ready for the festive season lined up during the next two months. Dealers are stuffed with inventory to catch the festive demand. With new product launch M&M has clearly shown that a good product portfolio attracts demand defying macro hurdles, while Maruti Suzuki has posted an unexpected performance as Manesar plant is back to normal and has in fact started second shift of operation. However, macros still remain weak for Maruti and valuations look stretched. Tata Motors though posted a negative growth, its negativity was insignificant as LCV segment excelled again. On the other hand, 2 wheelers have posted a dismal show in September as inventory pile up fear has come true leading to lesser push to the dealers’ end. Also, the sales in September were down yoy as in last year, the festivals were spaced out and had already started in September.  Hero, Bajaj and TVS Motors all have posted a yoy decline, while the latter has posted a good sequential growth. We expect the next couple of months to be strong for the industry and somewhat improve the full year performance.

 Ashok Leyland – (TP- Rs 25, Neutral) – MHCVs dip, Dost excels

In September, ALL’s MHCV sales dipped by 12% yoy to 7,596 units, while the LCV Dost sold 3,027 units v/s 197 units last year when it was just launched. Including Dost, the total sales increased by 21% yoy and 13% mom to 10,623 units. This clearly signifies that amidst pain in the MHCV segment, LCVs are still holding the forte strongly for ALL. YTD, the company has posted a 33% growth to 57,327 units mainly on the back of the LCV Dost, which was launched only in October last year.

 Bajaj Auto – (TP – Rs 1825, Neutral) – Exports recovery on track

Bajaj Auto’s September sales came 14% down on yoy basis to 3,60,152 units, while there was a mom improvement of 4%. Motorcycle sales de-grew by 15% yoy despite the new Pulsar 200 NS and Discover 125ST putting up a good show ( sold 9,000 units and 35,000 units respectively) in this month. Exports are seeing a mom recovery while on yoy basis the dip is narrowed to just 6% as Bajaj Auto sold 133,222 units with Sri Lankan and Egyptian markets almost up to their normal monthly run-rate. We expect full recovery from October onwards in exports and negative growth in domestic market to correct somewhat from the upcoming couple of festive months.

 Hero MotoCorp – (Under Review) – Solid dip

HMCL’s September sales nosedived by 26% yoy and 9% mom to 4,04,787 lakh units in September ahead of festive season which we believe is an attempt to clear off inventory and newly start stuffing the dealers with fresh inventory along with new models to catch the festive demand. Also the management has cited this dip as the current sentiment in the 2W industry. We expect demand to get back in full form from October onwards.

 Mahindra and Mahindra – (TP- Rs895, Neutral) – Consistent auto business, FES sees month on month uptick

M&M sold 48,342 units in the auto segment, 10% growth yoy and a 5% mom growth. Passenger UV sales in the month grew by 22% yoy to 23,808 units, which was a 15% mom growth. The UV sales growth came on the back of ramp up in the production of XUV5oo and a pan India launch of the same in June. Also the compact SUV Quanto was launched which has received a warm response, as its order backlog is at 3,000 vehicles currently. 4W pick-up segment which includes Gio, Genio and Maxximo posted a 7% growth yoy as the LCV segment continued to grow at a strong pace indicating strong demand in the sub 1 tonne market despite a slowdown in the bigger version of the CV sector. 3Ws went back to negative growth after a strong August, as sales declined by 17% yoy. Exports grew by a 3% yoy to 3,079 units as XUV5oo was launched in South Africa in August and traction was seen from geographies like Chile, Africa, Middle East and the US. FES segment posted a better than expected performance as the company sold 20,085 units in September which was a 24% yoy decline, however it was a whopping 52% rise mom. Although YTD FES segment has fallen by 7%, we expect second half to show some improvement on expectations of a strong rabi crop.

 Maruti Suzuki – (TP – Rs 1,123, Underperformer)-Surprising stuff!!

Maruti Suzuki (Maruti)‘s sales in this month came at 93,988 units up by 74% mom and 10% yoy which was much better than our as well as market’s expectations.  In a scenario where petrol prices are moving up, the bread and butter segment, the mini segment of Maruti comprising Alto, Wagon R and A Star grew by 4.9% yoy as the company is preparing for the festive season, while the company is providing >10% discounts on Alto and Wagon R. The compact hatchback segment comprising Swift, Ritz and Estillo has seen a fall of 9.7% yoy as diesel prices have seen a hike in the month while on the other hand, production at Manesar is slowly getting back to normal.  Dzire model which had been a star performer for Maruti succumbed to the lockout and declined by 60.7% yoy in August. But in September it came back to its old glory as it grew by 24.3% yoy. Vans segment grew in the positive territory after several months, as it went up by 7.5% yoy as vehicles such as Omni and Eeco showed some improvement. MPV segment, backed by the newly launched Ertiga sold 7,224 units thus maintaining its high demand base of ~7,000 units. SX4 model grew by about 46.9% yoy although the model has seen strong pressures over the past year as competition from Vento, City and Verna has increased. Exports looked weak this month again as they fell by 23% yoy. Although September sales were strong, and the next couple of months will continue to remain so, the company will still underperform on a full year basis as fuel prices are zooming up and interest rates are yet to cool off. At current price point, the stock looks overvalued to us.

 Tata Motors – (TP- Rs298, BUY)- Numbers above expectations

September sales for the company were lower by 4% yoy, while on mom basis, it went up by 5%. CV sales grew by 5% yoy, out of which LCV sales were up by 19% yoy signifying LCV segment’s defiance of the macro uncertainties. New launches like the variant of Ace Zip led to the growth in LCV. MHCV sales however slipped by 16% yoy as macro weaknesses continued to trouble in the month. PV segment sales fell by 18% yoy while an improvement is expected in festive season. Nano segment grew by 87% yoy to 5,491 units, while it was an 15% decline on a mom basis.  Indica range fell by 23% yoy while Indigo products posted 26% decline yoy. Utility segment sales were by 15% yoy.

 TVS Motor – (TP- Rs 32, Underperformer)- Aberration!

TVS sold 1.71 lakh units in September which was better than our expectations. This was a 10% mom growth and a de-growth of 22% yoy. Motorcycles de-grew by 29% yoy to 63,832 units, while scooters de-grew by 28% yoy to 40,055 units. 3 Wheelers improved drastically as it touched record high of 5,005 units a growth of 36% yoy.  We believe this to be a 2-3 months affair on account of festive season and the stock would in our view  remain an underperformer.

 

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Good come back!

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Good come back!

 Better than expected January performance surprised us as December was quite a low for many of the companies. Maruti was more than a surprise as quickly getting back to recovery after abysmal October sales was not expected. However, sustainability of the same is a question as government’s stand on diesel vehicles will play a big role in future sales of Maruti. Also, competition, and higher fuel prices are still downside risks for the company. M&M put up a robust show on the auto side and is expected to excel further as XUV500 sales gains momentum. On FES side, the performance was down yoy, but showed a good pull back sequentially. Tata Motors stunned one and all on the street as all of its segments showed a strong performance. CV sales were buoyant on strong LCV sales, while PV sales were up on strong Indica and Indigo sales. TVS was a big disappointment as its market share is getting cut on strong competition all around. Given the rally witnessed in stock prices, currently we believe that the valuations of most of the auto companies seem stretched. Hence, we are neutral to underperformer on most of the auto stocks now. We however maintain Buy on M&M and Ashok Leyland.

 

Hero Motocorp – (TP – Rs1,996, Neutral)Still holding on…

HMCL sold 5.2 lakh unts in January, which was a 11.55 yoy growth and a fall of 3.7% mom. This was slightly lower than our expectation of 5.25 lakh units. The YTD growth of the company now stands at 17.4%, the strongest among the two wheeler companies, while we are expecting 15% growth in FY 12. HMCL has been the only two wheeler company which is still showing traction in growth vis-à-vis other players who have shown moderation. A sudden fall in mom volume growth cannot be ruled out if HMCL is pushing volumes to the dealers.

 

Mahindra and Mahindra – (TP- Rs772, BUY) – Auto segment posts strong performance, FES slows down further

M&M sold 44,718 units, a 22% growth yoy while it was a growth of 5% mom. This performance was better than our expectations. Passenger UV sales in the month grew by 15% yoy to 18,446 units, which was 2% growth mom. 4W pick-up segment which includes Gio, Genio and Maxximo posted a robust 35% growth yoy as the LCV segment continued to grow at a strong pace indicating expansion in the total sub 1 tonne LCV market. Verito sales were strong in the month at 1,529 units up 37% yoy v/s ~1,300 units in December. Export sales moved up by 95% yoy  to 3,348 units with traction seen in major export markets like South Africa and US. Farm Equipment Segment (FES) which had posted a very robust growth of 71% in October almost halved in November, and moved down even further to 15,315 in December has posted a negative growth of 6% yoy in January. This was still better than what we had expected and is above the December number of ~15,500. Opening up of bookings for XUV 500 again in 19 cities of India in January will lead to a better volume performance from this model in FY 13. Since the booking have opened, XUV 500 has registered bookings of more than 5,900 units. Pan India launch will happen once the capacities move up to >5,000p.m. levels in May from current levels of 2,000 p.m.

 

Maruti Suzuki – (TP – Rs 1015, Underperformer)- Strong recovery

Maruti Suzuki (MSIL)‘s sales in January came at 115,433 units as compared to 92,161 units, 25% growth on mom basis, while on yoy basis it  was up by 5.2%. In a scenario where petrol prices are moving up, the bread and butter segment, the mini segment of Maruti comprising Alto, Wagon R and A Star de-grew by 2.4% yoy. The compact segment comprising Swift, Ritz and Estilo showed an improvement as demand for diesel car is moving northwards on the backdrop of gap between petrol and diesel prices increasing.  Vans segment also declined by 11% yoy, but showed a good growth of ~40% mom. Exports were the star performer again as they grew by 54.3% yoy as they sold 14,386 units a jump over ~9300 units yoy, while mom, it was lower by 300 units only. However, SX4 and Dzire segments posted yoy de-growth, at 12% and 10% respectively. Any rate cut by the central bank of India may have a positive impact on the volumes, while petrol price hike will impact sales adversely and on the other hand any call on the diesel cars in upcoming budget may hamper diesel car sales. Launch of Ertiga needs to be watched out as low ground clearance may pose a setback to the company while pricing between Rs7-8 lakh will push sales.

 

Tata Motors – (TP- Rs253, Neutral)- Stellar performance!

January sales for the company were at 87,465 units, 16% up yoy and 6% up mom. CV sales grew by a healthy 14% yoy, out of which LCV sales were up by 15% yoy signifying LCV segment’s defiance of the macro uncertainties. New launches like the variant of Ace Zip led to the growth in LCV. MHCV sales also grew by 11%, which was a strong growth again. PV segment sales have started to pick up since last couple of months as they grew by 14% yoy on some strength coming from Indica range which was up 9% yoy on new launch of Indica Vista launched a quarter back. Utility segment sales went up by 38% yoy. Indigo range sales were smartly up by 10% yoy. Nano sales grew at 7,723 units  15% up yoy and showing a quick recovery over the past few months and lows hit at 500 units in November 2010. Continued strength in CV business aided by LCVs and recovery in PV sales have led to a solid growth in volumes of the company.

 

TVS Motor – (TP – Rs55, Underperformer)- Losing out to competition

TVS sold just 1.73 lakh units in January missing our estimate of 1.82 lakh by a good margin. This was a growth of just 3% mom and 5% yoy. Scooters segment grew by just 2% yoy to 41,469 units, while motorcycle sales in January reported a de-growth of 5%. Three wheelers are posting a consistently disappointing performance as the company sold just 2,402 units v/s 3,427 units a year ago. Mopeds segment, which is the major volume earner for TVS declined by 13.8% yoy to 45,937 units v/s its monthly run rate of~64,000 units. With rising competition in the scooter segment, slowdown in motorcycle segment and structural weakness in 3wheeler segment , we now believe TVS will be a laggard in the 2W segment.

 

Written by Fundamental Side

February 8, 2012 at 6:32 pm

Two wheelers hit a roadblock, 4 wheelers better than expectations

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Two wheelers hit a roadblock, 4 wheelers better than expectations

 In a lean month of December, 4 wheeler companies posted a good performance despite severe pressures in terms of consumer sentiments, higher cost of ownership, high fuel prices, maintenance shutdowns at few companies and expected slowdown in demand. Maruti continued to sell more than 90,000 units, while M&M sold >42,000 units of auto sales including SUVs, LCVs and 3 wheelers, which was a good growth. Tata Motors also improved its PV sales performance with Nano putting one of its best performances in the recent past. On the CV side, LCVs continued their robust performance while MHCV grew within their limits. 2 wheeler sales spoiled the otherwise good show from the auto pack, as Bajaj Auto posted a dismal show and TVS Motor put up a suppressed growth. Going forward, with seasonally strong Q4 coming up, we see some recovery in auto sales. Any cut in interest rates or any moves by the government in budget like application of higher excise duty on diesel cars will be the triggers to the sector. Expected price hikes from most of the players may have a contra-intuitive impact on the volume performance of the sector. We continue our cautious view on the sector.

 

Bajaj Auto – (Under review) – Unexpected weakness witnessed

Bajaj posted a very disappointing sales performance in December as sales plummeted by 18% mom to 3,05,000 units, while growing at just 10% yoy.  Motorcycle sales were up 8% yoy and down 21% mom. A maintenance shutdown for 4-5 days, increasing inventories at the dealers’ end, weakening demand for premium segment two wheelers and lukewarm response to the recent launch of Boxer bike led to a tepid performance by Bajaj Auto. Exports de-grew by 7% mom while growing by 25% yoy. Going forward, as retail inventory gets cleaned up and seasonally good Q4 comes up, we are expecting Bajaj Auto to get back to the level of >350,000 units.

 

Hero Motocorp – (TP – Rs1,928, Neutral) – Solid resilience!

HMCL has surprisingly held a 5.4 lakh units  of sales  performance, a growth of 7.8% yoy and flat growth mom.  The company is a proxy to the rural growth in India and continues to post stellar numbers on growing rural economy even when its competitors are faltering. We expect them to put up a volume growth of 15% in FY 12, however we are concerned about competition coming up from Honda in FY 13 as they are rapidly ramping up the capacities against Hero who are at nascent stage of setting up new capacities which may become a constraint to their  growth. Slightly stretched valuations and margin concerns are other worries.

 

Mahindra and Mahindra – (TP- Rs889, BUY) – Auto segment posts decent performance, FES slows down

M&M sold 42,761 units, a 26% growth yoy while it was a growth of 5% mom. UV sales in the month grew by 23% yoy to 18,078 units, which was 8% growth mom. 4W pick-up segment which includes Gio, Genio and Maxximo posted a robust 35% growth yoy as the LCV segment continued to grow at a strong pace indicating expansion in the total sub 1 tonne LCV market. Verito sales were strong in the month at 1,263 units up 41% yoy v/s 896 units. Export sales moved up by 89% yoy  to 2,870 units with traction seen in major export markets like South Africa and US. Farm Equipment Segment (FES) which had posted a very robust growth of 71% in October almost halved to 17,527 as inventory correction happened in November and moved down even further to 15,315 in December and we expect the current monthly run rate of tractors to be maintained, thus punching a growth of close to 18% in FY 12. Opening up of bookings for XUV 500 again in 5 cities of Mumbai, Pune, Bangalore, Chennai and Delhi in January will lead to a better volume performance from this model in FY 13. Pan India launch will happen once the capacities move up to >5,000p.m. levels in May from current levels of 2,000 p.m.

 

Maruti Suzuki – (TP – Rs 887, Underperformer)- Stable sales performance

Maruti Suzuki (MSIL)‘s sales in December came at 92,161 units, flattish mom, while on yoy basis it was down by 7% as consumer sentiments in PV industry deteriorated off late. The flattish growth indicates signs of stability at Maruti’s end even when there was a maintenance shutdown at their plants. Had the  shutdown not been there, sales would have come close to 100,00 level. In a scenario where petrol prices are moving up, the bread and butter segment, the mini segment of Maruti comprising Alto, Wagon R and A Star de-grew by 16% yoy. The compact segment comprising Swift, Ritz and Estilo remained flat yoy.  Vans segment also declined by 42% yoy. Exports were the star performer as they grew by 50.5% yoy s they sold 14,686 units a jump over 11,000 run rate observed over the past few months. However, SX4 and Dzire segments posted growth, at 11% and 6% respectively. Any rate cut by the central bank of India may have a positive impact on the volumes, while petrol price hike will impact sales adversely. New launches from competitors add fuel to this. The upcoming auto expo in January will see two MPV launches from Maruti (one being named as Ertiga).

 

Tata Motors – (TP- Rs195, Neutral)- Performance par excellence!

December sales for the company were at 82,278 units, 22% up yoy and 7% up mom. CV sales grew by a healthy 14% yoy, out of which LCV sales were up by 20% yoy signifying LCV segment’s defiance of the macro uncertainties. New launches like the variant of Ace Zip led to the growth in LCV. MHCV sales also grew by 5%. PV segment sales have started to pick up since last couple of months as they grew by 47% yoy on some strength coming from Indica range which was up 57% yoy on new launch of Indica Vista launched a quarter back. Utility segment sales went up by 35% yoy. Indigo range sales were smartly up by 32% yoy. Nano sales grew at 7,466 units  29% up yoy and showing a quick recovery over the past few months and lows hit at 500 units in November 2010.

 

TVS Motor – (TP – Rs60, BUY)- Still below the monthly mark of 2lakh…

TVS Motor failed again this month to sell 2 lakh units. In October they had missed due to an unexpected maintenance shutdown. However, the fall in November came on weak motor cycle sales and the same continued in December as well. Total sales showed a flattish to a slight negative growth on yoy basis at 170,428 units, while sequentially they de-grew by 3%. Scooter sales grew by 7%, while motor cycle sales declined by 8%. Bloating up of inventory pipeline on weak retail demand led to such an underperformance. TVS’s 3 wheeler sales are on a lower trajectory as they sold just 2,523 units from 3,431 units sold in last December. Exports grew by 6% yoy. We believe that 15% volume guidance by management looks too optimistic. We expect 9% growth from TVS this year. In view of attractive valuations, upcoming new launches and economies of scale, we remain positive on TVS even after factoring 9% volume growth this year and 11% next year.

No real cheer in Motown during the festive season

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No real cheer in Motown during the festive season

 With festive pre-buying set in the month of September, October showed comparatively subdued numbers sequentially. Going forward, we believe that seasonality will creep in towards the end of calendar year and the next two months will be even more subdued. Additionally, PVs will face the heat considering the interest rate hikes and fuel price hikes. Two wheeler demand is expected to be firm with positive developments happening in the rural markets such as good monsoon, rise in MSPs and employment schemes enforcement. CVs are expected to grow at a steady pace close to 10% on demand from LCV segment.

 Bajaj Auto – (TP – Rs1,893, BUY) – Curfew at Pantnagar led to a loss of 25,000 units

Bajaj Auto has posted a record October performance by selling 3.95 lakh units, a growth of 7% yoy while it declined 7% mom. This has been the third month post the launch of 150cc Boxer, which again sold 10,000 units. Production got affected due to curfew at Pantnagar to the extent of 25,000 units. The twin brands Pulsar and Discover reported strong growth and contributed ~70% of total motorcycle sales. The company has recorded highest ever motor cycle sales in any October thus indicating that the 2 Wheeler sector is insulated from any macro headwinds. Three wheeler sales came in at 44,191 units, a growth of 8% yoy, and a fall of 5% mom. On the export side, Bajaj Auto sold 1.31 lakh units, a growth of 20% yoy and contributed 33% of sales v/s 29.7% yoy, which indicates a better profitability in the month. For the first seven months of the year, the company reported 15% yoy growth to cross the 2.65 mn mark.

 Hero Motocorp – (TP – Rs1,928, SELL) – Sequential de-growth

HMCL had posted a record breaking volume performance in the month of September as it sold 5.49 lakh units in the festive environment. However, in October it failed to reach that mark and reported just 5.12 lakh units , a growth of 1.2% yoy and a decline of 7% mom. The company mentioned that at retail levels, the sales were more than 6 lakhs in October. 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 – (Under Review) – Tractor sales robust, but auto sales slipped mom

M&M sold 41,506 units, a 20% growth yoy while it declined 6% mom. UV sales in the month grew by 6% yoy to 16,938 units, while declined 7% mom. 4W pick-up segment which includes Gio, Genio and Maxximo posted a robust 41% growth yoy as the LCV segment continued to grow at a strong paceindicating market share gain. Also new variants of Maxximo and Genio launched over the past month, which have performed well. Verito has posted yet another stellar month with a highest ever monthly sales recorded at 1,818 units , 16% mom growth v/s 1,560 units. Export sales moved up by 7% yoy with traction seen in major export markets. Farm Equipment Segment (FES) posted a very robust growth of 31% yoy to 31,838 units, while sequentially they zoomed up by a whopping 29% on festive demand post a strong monsoon and MSP on food grains being hiked. The festive launch of new SUV XUV500 priced in the range of Rs11-14 lakhs is expected to boost the UV sales as it has already attracted bookings of 8000 units and the company has stopped taking any more orders.

 Maruti Suzuki – (TP – Rs 930, Underperformer)- Lowest ever monthly sales in the last decade

Maruti Suzuki (MSIL) ‘s sales in October came at 55,595 units, a sharp decline of 53% yoy, while on mom basis it was down by 35% driven by labour unrest at its plants leading to a production loss of 40,000 units. Also macro factors spoiled the game as PV sector is struggling to gain its lost luster. The company was completely unable to enjoy the festive season this year. The bread and butter segment, the mini segment de-grew by 55%, while the compact segment fell by 56% yoy.  Exports were down by 64% yoy as A Star, the best selling export model faced the brunt of labor unrest at Manesar. We do not see Maruti to punch more than one lakh units in the near future and hence report a negative growth in FY 12. MSIL’s market share in the first half of the year has gone down below 40%. 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 – (Under Review)- Sales slip sequentially

October sales for the company were at 68,009 units, 5% up yoy and 16% up mom. CV sales grew by 13% yoy, out of which LCV sales were up by 6% yoy, signifying some loss of market share to M&M and MHCV sales were 23% higher yoy, a trend reversal. This reflects strong CV sales despite macro headwinds. PV segment sales declined by 3% on macro pressures on the PV segment to 25,746 units while utility segment sales went up by 23% yoy.  Indica range grew by 11% yoy as a new variant of Indica was launched 2 months back. Indigo range sales were also low by 24% yoy. Nano sales grew on lower base at 3,868 units albeit low, up 26% yoy , while on mom basis, Nano’s grew by 30%.

 

Written by Fundamental Side

November 4, 2011 at 5:18 pm

LCVs, 2W holding strong, Cars in reverse gear!

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LCVs, 2W holding strong, Cars in reverse gear!

Month of July being another traditionally sluggish month for auto sales has reported weak sales as per expectations, especially in the cars segment. Maruti Suzuki faced the brunt this month again as shifting of production and discontinuation of old model for a new model launch taxed the company heavily. Also another round of interest rate hike from RBI is set to spoil the mood next month. Tata Motors’s car segment including Nano also put up a dismal show as it has already started to weaken in an intense competitive environment. On the 2W side, sales are still holding firmly as they seem to be insulated from macro risks as indicated by TVS Motor, which reported robust sales in July. The trend in the LCV segment is also still going strong as indicated by M&M and Tata Motors’s LCV sales. To sum up, we continue our negative stance on Maruti Suzuki which is the biggest victim of the macro headwinds, followed by Ashok Leyland which we believe being a pure play MHCV player will feel the heat. On the two wheeler side, Hero Honda’s value is factored in its stock price, while we see margin pressures to add to the company’s woes. We believe Bajaj Auto, TVS Motor, M&M and Tata Motors are on a strong wicket considering their specific strengths outpacing their weaknesses.

Mahindra and Mahindra – (TP- Rs 804, BUY) – Clear outperformer
Yet another month of strong performance by M&M marks this company as a clear cut winner in the auto space with no hiccups in a difficult environment. M&M reported a strong 41% yoy growth in its auto segment to 39,633 units, with passenger UV sales growing 30%yoy and the 4W pick-up segment which includes Gio and Maxximo posting a robust 91% growth yoy. Verito has posed yet another stellar month with a growth of 117% yoy with sales recorded at 1,630 units , 8% mom above 1,510 units sold in June and 1,219 sold in May. Export sales also moved up by 78% with traction seen in major export markets. Farm Equipment Segment (FES) posted a very robust growth of 15% yoy to 16,718 units, while sequentially they were down by ~30% on the pre monsoon purchases in June, which is one of the best month for tractor sales.

Maruti Suzuki – (TP – Rs 1,195, Underperformer)- Another disappointing month
Maruti Suzuki (MSIL) ‘s sales slumped in July to 75,000 odd units, a decline both on yoy as well as mom basis. This was mainly on shifting of production of Swift Dzire from Manesar plant to Gurgaon plant and discontinuation of dispatch of old Swift in July before the upcoming launch of new Swift in August. Both these activities hit the company by collective sales of ~17,000 units. Had it not been the case, the sales would have been up on mom basis, while still down on yoy basis by 8%. Going forward, the recent 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 – (Under review)- CV sails, PV fails!
June sales for the company were at 63,761 units, 6% down yoy and 5% mom. CV sales grew by 14% yoy, out of which LCV sales were up by 22% yoy and MHCV sales were 4% higher yoy. This reflects strong CV sales despite macro headwinds especially in the LCV space. PV segment sales were down by 39% yoy to 30,166 units while utility segment sales fell by 2% yoy. Indica range continued to see a de-growth of 32% yoy as competition in the hatch back segment continued its intensification with the market leaders Maruti and Hyundai also feeling the heat. Indigo range sales were also low by 30% yoy. Nano also underperformed, continuing its downward trajectory selling only 3,260 v/s 5,451 units in June, 6,500 in May and 10,000 odd units in April.

TVS Motor – (TP- Rs 66, BUY)- Marching ahead
TVS sold 1.89 lakh units in July, a strong growth of 14% yoy, while on a mom basis it inched 4% up. Scooter sales grew by 22% on strong Wego sales, while motor cycles grew by 17% despite Jive being a failure. Total domestic two wheelers grew by 12%, while exports sailed by 34%. 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 3,290 units up 6% yoy, which is seeing a trend reversal as export sales have more than doubled domestic sales in the last few months. Opening up of new 3W permits and launch of 2 new 2W will lead to a good traction in TVS sales going forward. Management has guided for a 15% volume growth this year.

Written by Fundamental Side

August 1, 2011 at 5:40 pm

Momentum Continues in Mo-Town

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Automobile sales for January– Macro pressures fail to dampen the momentum

Hero Honda – (TP – Rs1,777, NEUTRAL)

Hero Honda reported a 19.7% yoy strong growth to 4.66 lakh units in January, but it was a ~7% dip mom. We believe the company will face strong headwinds going forward as Honda goes solo in the Indian markets aggressively and the company underperforms its two wheeler peers on margin as well as volume front in the wake of competition.

Mahindra and Mahindra – (TP- Rs 878, BUY)

M&M reported a strong 22% yoy growth in its auto segment to 35,718 units, with passenger UV sales growing 11%yoy and the 4W pick-up segment which includes Gio and Maxximo posting an 18% growth yoy. Maxximo has maintained its 23% market share in the geographies where it is launched. The company has recently announced the launch of another LCV ‘Genio’ priced at Rs5lakhs. Since the termination of JV with Renault, Logan seems to be regaining its lost pride, as it is posting strong growth month on month. In January, M&M sold 1,120 units of Logan as compared to 555 units in January 2010 and 896 units sequentially. LCV sales grew by 28% yoy, marked by the increase in the sales of LCVs from Mahindra NavistarJV. Farm Equipment Segment(FES) posted a very robust growth of 22% yoy to 19,340 units, while sequentially also they grew by 17%. On a cumulative basis, the company has grown by 28% and 21% in the auto and FES segments respectively.

Maruti Suzuki – (TP – Rs 1589, BUY)

Maruti Suzuki (MSIL) once again sold volumes in the vicinity of 1,10,000 units at 1,09,743 units after a lackluster December. This was a growth of 15% yoy and 22% mom. The company has stuck to its guidance of selling 1,10,000 units per month till the end of FY 11E. MSIL have sold more than 1 mn units cumulatively in the interim of the year for the first time. In the full year we expect it to sell 1.2mn units and post FY11E, management expects it to sell 1,16,000 units per month (1.4mn p.a.). Within the segments, the bread and butter A2 segment of hatch backs posted 24% growth, while the A3 segment witnessed 33% growth. The C segment which contains the recently launched Eeco also showed a good traction of 28% rise on a yoy basis. Exports continued to slide down by 36% as non Western European markets are yet to show signs of pick up.

Tata Motors – (TP – Rs 1580, BUY)

January sales for the company were extremely strong with a 12% mom growth and a 15% yoy growth to 75,423 units, the highest ever sales for the company defying the macro concerns like interest rate hike and inflation worries. CV growth pace was robust in the month, as M&HCV grew by 5% yoy, while LCV grew by 17% yoy. Overall CV sales grew by 12% yoy. PV segment grew by 14% yoy to 28,460 units while utility segment sales grew by 26% yoy. Indica range saw a de-growth of 8% yoy as competition has started to intensify in the hatch back segment where the company has a limited product portfolio in the PV segment, especially the hatch backs. Indigo sales saw a sales growth of 17% yoy. Nano sales were higher m-o-m at 6,703 units vis-à-vis 5,784 units in December and a dismal November performance of just 500 units on attractive marketing ventures. Cumulative sales of Nano are ~53,000 way below their expected full year target of >100,000 units.

TVS Motor – (TP – Rs86, BUY)

TVS sold 165,152 units in January, a growth of 30% yoy, while on a mom basis it showed a 4% decline. The sequential drop was due to a temporary maintenance shutdown of its plants in the month of January. Three wheeler sales came at 3,427 units. Going forward, the company has maintained its annual guidance of 2mn vehicles in FY 11E by selling more than 1.75 mn units per month in the remaining two months. Management is expecting the export volumes to pick up in the next two months while domestic volumes to get slightly impacted by interest rate hike, though we believe that 2 wheelers will not get significantly impacted by it.

Written by Fundamental Side

February 1, 2011 at 6:02 pm