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Cars gearing down in June.

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Cars gearing down in June.

June, the month which is seasonally sluggish before the onset of monsoon was indeed sluggish for a few companies like Maruti Suzuki, not to forget the 10 day strike and maintenance shutdown at its plants. Fuel price hike and another round of interest rate hike is set to take their toll on the PV industry, which was evident from June sales of PVs. Tata Motors also continued to witness a severe slowdown in PV segment fuelled by intensifying competition. On the CV side, there is still some resilience shown by companies like Tata Motors and M&M, where these companies have performed above expectations. LCVs outperformed the overall CV industry. Two wheeler industry has also performed well in June, as it seemed the most insulated sector from the macro headwinds. We remain positive on Bajaj Auto, Tata Motors and M&M, while we have turned negative on Maruti Suzuki and Ashok Leyland, and continue to be negative on Hero Honda. TVS remains a Neutral for us.

Mahindra and Mahindra – (TP- Rs 804, BUY) – The bright spot!
In a scenario where auto companies are showing signs of slowdown, M&M continues to outperform the industry through robust sales in its well-diversified product portfolio. M&M reported a strong 29% yoy growth in its auto segment to 35,584 units, with passenger UV sales growing 14%yoy and the 4W pick-up segment which includes Gio and Maxximo posting a robust 65% growth yoy. Verito has posed yet another month of improved sales performance with a growth of 168% yoy with sales recorded at 1,510 units , 24% mom above 1,219 units sold in May and 1,050 sold in April. M&M is smartly increasing the sales of Verito on product revamp of the unsuccessful Logan. Farm Equipment Segment (FES) posted a very robust growth of 37% yoy to 22,730 units, while sequentially they were up 20% on pre monsoon purchases.

Maruti Suzuki – (TP – Rs 1,195, Underperformer)- Life after ‘LIVA’ to be difficult
Maruti Suzuki (MSIL) reported a 8.8% yoy de-growth in volumes, by selling 80,298 units in June which was about 16% fall on May, marred particularly by the 10 day long strike at its Manesar plant (loss of ~13,000 vehicles) and a 6 day maintenance shutdown at its Gurgaon plant and a similar ongoing shutdown at Manesar plant. Additionally, MSIL was the first to face the macro headwinds to the PV segment. A2, the bread and butter segment of MSIL posted just 2.3% yoy growth as the strike affected plant of Manesar produces the successful models such as Swift and A Star. Similarly, A3 segment, which was the top performing segment in April and May, also massively underperformed posting a de-growth of a whopping 60% yoy, again due to the strike. Kizashi sales were at 32 units. C segment sales were up by 23% due to continued success of Eeco in both private as well as taxi segments. Exports remained stable mom at 10,278 units, down by 33% yoy. Management has guided for a continuous export sales of 10,000 units every month, which implies a double digit(lower teens) degrowth in FY 12. Headwinds continue to be there for the PV segment on the back of rising fuel prices and interest rates. Competitive launches such as the recent launch of Toyota Liva pitched directly and aggressively against Swift will make things difficult for MSIL along with a slew of competitive launches, thus leading to a higher single digit growth in the domestic markets.

Tata Motors – (Under review)- CVs strong, PVs lack the zeal
June sales for the company were at 66,358 units, 1% up yoy and a growth of 6.5% mom. CV sales grew by 13% yoy, out of which LCV sales were up by 18% yoy and MHCV sales were 6% higher yoy. PV segment sales were down by 21% yoy to 21,993 units while utility segment sales fell by 4% yoy and equally on mom basis. Indica range continued to see a de-growth of 9% 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 35% yoy. Nano also underperformed, which sold only 5,451 units as compared with 10,000 odd units in April, and ~6,500 in May.

TVS Motor – (TP- Rs 63, Neutral)- Still robust
TVS sold 1.82 lakh units in June, a strong growth of 14% yoy, while on a mom basis it showed a 2% de-growth. This growth indicates that the macro concerns have still not hit the two wheeler sector and TVS’s brands are showing a good demand. Two wheeler sales also grew by 14% yoy, while 3 wheelers are showing a consistent performance touching 4,000 units time and again.

Written by Fundamental Side

July 4, 2011 at 11:35 am

Posted in Auto Segment

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