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  • 8/10/2019 IDirect_Motogaze_Sept14

    1/14CICI Securities Ltd.|Retail Equity Research

    September 16 2014

    toGaze September, 2014

    Green shoots turning into steady growth!!!

    Momentum continues as festive season ramp-up begins

    August saw the momentum continuing as inventory ramp-up for the

    festive season has begun. With expectations of strong festive seasongrowth as the economy revives, we expect a strong ramp-up in channel

    inventory for September as well. Also, with the monsoon deficit reducing,

    sentiment has picked up. The volume growth was led by the two-wheeler

    (2-W) segment, which grew ~19% YoY to ~1.6 million units. The scooter

    segment continued to lead the way and outperformed the industry with

    ~31% YoY growth aided by new product launches by Yamaha and TVS as

    well as capacity expansion from HMSI. The motorcycle segment grew

    ~14% YoY with strong growth coming from market leader HMCL (up 24%

    YoY). However, HMSI and BALs performance in the motorcycle segment

    has been disappointing (~2%, ~4% YoY growth). The passenger vehicles

    segment saw sustained growth and grew ~7% YoY. Domestic volumes

    grew ~13% YoY while exports de-grew ~11% YoY. The overall utility

    vehicle segment grew ~22% YoY. The CV segment is the only one to

    witness a decline and de-grew ~4% YoY. However, the M&HCV segment

    has seen a recovery and grew 12% YoY for the month. The LCV segment,

    however, continued to witness pressure and fell ~11% YoY.

    New launches in pre-festive season to set the tone!

    With the auto industry finally showing signs of a recovery after nearly two

    years of demand slump, the festive season is likely to be eagerly awaited

    by OEMs. New launches and product refreshes are the key, going ahead,

    as new product launches clearly aid in revival of sentiments by pulling

    consumers to showrooms. Success of new products like Ecosport, Grande

    i10, Celerio and huge bookings for the newly launched Mobilio are

    testament to the same.Macro tailwinds likely to pick up with economic revival!

    To provide a boost to the auto sector, excise duty cuts have been

    extended by about six months to December. Going ahead, with an

    improvement in overall economic activity, we believe macro headwinds

    like currency, interest rate and inflation will turn positive and help the

    industry. However, the dampener to our assumptions can be lower-than-

    expected monsoons in the last leg, which may depress rural demand.

    Industry outlook

    We expect an improvement in demand sentiments and believe the overall

    industry will grow 10-12% for FY15E. For the passenger vehicle segment,

    we expect 7-9% growth while the M&HCV segment is likely to improve 5-7% with a major recovery likely in H2. The LCV segment is likely to

    underperform the M&HCV segment and remain flat. The 2-W segment is

    likely to grow ~11-13%, led by strong growth in the scooter segment and

    macro factors helping discretionary spending. On a longer term basis, we

    remain positive on the growth prospects of the industry with a rise in

    incomes augmenting auto penetration levels in the country.

    On the basis of index performance, for August, the BSE Auto index (1.6%)

    has marginally underperformed the BSE Sensex (up 1.9%). Among our I-

    direct auto coverage, we remain bullish on frontline OEM stocks like Tata

    Motors, Bajaj Auto as well as Eicher Motors. Also, we believe valuations

    for ancillary stocks are likely to remain on an uptrend as earnings grow onthe favourable impact of operating leverage on increased demand as well

    as favourable raw material prices. We continue to remain positive on the

    tyre sector.

    ctor View

    alweight

    ume performance

    mpany Gr. YoY(%)

    o Motocorp 21.4aj Auto 7.9

    Motors 46.6

    uti Suzuki 26.9

    a Motors -17.6

    hindra and Mahindra -7.2

    ok Leyland 16.7

    y players & industry volume growth Aug14 (%)

    17.2

    -8.0

    26.9

    20.1

    46.6

    21.4

    7.9

    -17.6

    16.7

    -7.2

    0.2

    -1.1

    3.2

    9.3

    -2.7

    12.1

    5.5

    5.4

    4.4

    6.6

    Industry

    HMCL

    BAL

    TVS

    HMSI

    Maruti

    TML

    M&M

    Hyundai

    ALL

    YoY gr

    MoM gr

    rce: Siam

    y players & industry volume growth YTD (%)

    4.6

    28.2

    30.6

    17.2

    .0

    -7.8

    13.7

    11.8

    -3.8

    -7.4

    Industry

    HMCL

    BAL

    TVS

    HMSI

    Maruti

    TML

    M&M

    Hyundai

    ALL

    rce: Siam

    alysts name

    shant Vass

    [email protected]

    nil Shah

    [email protected]

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    Two & three wheeler industry

    The domestic two-wheeler industry saw ~19% YoY growth to 1.34 million

    units in August as major OEMs have pushed inventory in the system on

    expectations of a strong festive season. The scooter segment continued to

    outperform the industry with growth of ~31% YoY while the motorcycle

    segment witnessed growth of ~10% YoY.

    The three-wheeler industry at 91,726 units has grown ~37% YoY with the

    domestic segment growing ~24% YoY while the export market has seen

    ~60% YoY growth (led by BAL, which witnessed ~70% YoY growth).

    Market share movement

    According to data released by the Society of Indian Automobile

    Manufacturers (Siam), the domestic market share of two and three-

    wheeler players is as below for August 2014.

    Exhibit 1:

    Domestic market share movement in two-wheelers

    15.2

    42.7

    11.7

    22.2

    8.1

    11.7

    41.8

    12.7

    25.1

    8.8

    11.4

    41.4

    12.9

    25.6

    8.7

    0

    5

    10

    15

    20

    25

    30

    35

    40

    45

    Bajaj Auto Hero Motocorp TVS motor HMSI Others

    (%)

    Aug-13 Jul-14 Aug-14

    Source: Siam, Data used is YTD

    Exhibit 2:

    Domestic market share movement in three-wheelers

    41.6

    35.2

    11.4

    11.8

    46.4

    31.9

    9.8

    11.9

    46.4

    31.8

    9.9

    11.9

    0 5 10 15 20 25 30 35 40 45 50

    Bajaj Auto

    Piaggio

    M&M

    Others

    (%)

    Aug-13 Jul-14 Aug-14

    Source: Siam, Data used is YTD

    The 2-W segment has seen a bit of a turnaround in

    fortunes with the festive season showing good growth.

    Segment leader HMCL has shown good growth even as

    aggressive competitor HMSI has gained market share with

    enhanced production capacity ensuring lower waiting

    periods

    The domestic 3W market has started improving from the

    start of the year and is up ~17% YTD

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    Exhibit 3:Domestic market share movement in motorcycles

    21.2

    52.8

    5.4

    14.517.0

    53.9

    5.9

    15.816.6

    53.8

    6.0

    16.0

    0

    10

    20

    30

    40

    50

    60

    Bajaj Auto Hero Motocorp TVS motor Honda

    (%)

    Aug-13 Jul-14 Aug-14

    Source: Company, ICICIdirect.com Research

    Exhibit 4:

    Domestic market share movement in scooters/scooterettes

    20.5

    12.5

    50.7

    16.417.3 15.1

    53.7

    13.916.3 15.6

    54.8

    13.3

    -5

    5

    15

    25

    35

    45

    55

    Hero Motocorp TVS Motors Honda Others

    (%)

    Aug-13 Jul-14 Aug-14

    Source: Siam, Data used is YTD

    Hero MotoCorp continues to be the market leader in the

    executive and economy segments. High fuel prices and an

    overall reduction in discretionary spending have started to

    hit this segment. The market seems to be moving in favour

    of MNC OEMs like HMSI, Suzuki and Yamaha that have

    shifted the focus to the economy segment

    HMSI continues to be the clear leader in the scooter

    segment. The scooter segment remains one of the fastest

    growing segments in the entire automobile industry. HMCL

    has continued to gain market share in the scooter segment

    while TVS has continuously lost market share

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    Exhibit 5:

    Market share movement in executive motorcycle segment*

    20.5

    56.1

    7.1

    16.3

    0

    10

    20

    30

    40

    50

    60

    70

    Aug-1

    2

    Sep-1

    2

    Oct-12

    Nov-1

    2

    Dec-1

    2

    Jan-1

    3

    Fe

    b-1

    3

    Mar-13

    Apr-13

    May-1

    3

    Jun-1

    3

    Ju

    l-13

    Aug-1

    3

    Sep-1

    3

    Oct-13

    Nov-1

    3

    Dec-1

    3

    Jan-1

    4

    Fe

    b-1

    4

    Mar-14

    Apr-14

    May-1

    4

    Jun-1

    4

    Ju

    l-14

    Aug-1

    4

    (%)

    0

    4

    8

    12

    16

    20

    (%)

    Bajaj Auto (RHS) Hero Motocorp TVS (RHS) HMSI (RHS)

    Source: Siam * only top 4 two-wheeler OEMs

    Exhibit 6:

    Market share movement in greater than 125 cc segment

    75.5

    9.1

    15.4

    15.5

    0

    10

    20

    30

    40

    50

    60

    70

    80

    90

    Aug-1

    2

    Sep-1

    2

    Oct-12

    Nov-1

    2

    Dec-1

    2

    Jan-1

    3

    Fe

    b-1

    3

    Mar-13

    Apr-13

    May-1

    3

    Jun-1

    3

    Ju

    l-13

    Aug-1

    3

    Sep-1

    3

    Oct-13

    Nov-1

    3

    Dec-1

    3

    Jan-1

    4

    Fe

    b-1

    4

    Mar-14

    Apr-14

    May-1

    4

    Jun-1

    4

    Ju

    l-14

    Aug-1

    4

    (%)

    0

    5

    10

    15

    20

    25

    30

    35

    (%)

    Bajaj Auto (LHS) Hero Motocorp (RHS) TVS (RHS) HMSI (RHS)

    Source: Siam *only top three vehicle two-wheeler OEMs

    The executive motorcycle segment continues to be

    dominated by Hero MotoCorp. HMCL, BAL and TVS have

    lost market share while HMSI has gained share

    handsomely

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    Hero MotoCorp (HERHON) Hero MotoCorp, the market leader in the 2-W segment, saw strong

    volume growth (~21% YoY) as it is betting big on the festive

    season growth, thereby pushing inventory to dealers

    The domestic motorcycle segment at 5.0 lakh units grew ~24%

    YoY while the domestic scooter segment has de-grown ~15%YoY as scooter exports for the month stood at ~12500 units

    For the month, exports have continued at a neck-breaking growth

    of ~130% YoY, albeit on a low base. Even MoM, the growth is

    ~75% with the scooter segment contributing most to this growth.

    The management expects exports to start contributing more

    meaningfully from this year as the markets seeded in the previous

    year start showing traction in a few quarters

    Exhibit 7:

    Volume performance (in units)

    Segment Aug-14 Aug-13 %chg Jul-14 %chg YTD'15 YTD'14 %chg

    Motorcycles 499,380 404,278 23.5 472,996 5.6 2,495,103 2,228,708 12.0

    Scooters 59,229 55,718 6.3 56,866 4.2 308,497 278,115 10.9

    Total Sales 558,609 459,996 21.4 529,862 5.4 2,803,600 2,506,823 11.8

    Exports(inc. above) 23,106 9,850 134.6 13,201 75.0 72,962 51,502 41.7

    Exports (% of sales) 4.1 2.1 200 bps 2.5 164 bps 2.6 2.1 55 bps

    Source: Company, Siam

    Bajaj Auto (BAAUTO)

    Over the past few months, Bajaj Autos volume performance in the

    domestic markets has been under pressure as its entry-level

    segment (125 cc < 150 cc segment has, however, done well in thedomestic markets and seen growth of ~20% YoY

    The three-wheeler (3-W) segment has seen a strong rebound in

    volumes in both the domestic and export markets. The domestic

    segment saw ~43% YoY increase while the export market saw

    ~70% YoY jump (on a low base)

    The slowdown in domestic markets has been offset by the strong

    export growth. The contribution of exports, in volume terms,

    stood at ~52%, compared to ~47% last year due to a decline in

    domestic volumes and the low base of last year. On a YTD basis,

    exports contribution stands at ~48%

    Exhibit 8:

    Volume performance (in units)

    Segment Aug-14 Aug-13 %chg Jul-14 %chg YTD'15 YTD'14 %chg

    Total 2-wheeler sales 284,302 278,583 2.1 267,841 6.1 1,427,001 1,385,562 3.0

    2W exports 146,955 1 27,594 15.2 142,788 2.9 674,017 509,745 32.2

    2W domestic sales 137,347 150,989 -9.0 125,053 9.8 752,984 875,817 -14.0

    Total 3-wheeler sales 52,538 33,605 56.3 51,451 2.1 217,561 187,228 16.2

    3W exports 28,172 16,566 70.1 26,967 4.5 112,832 107,001 5.4

    3w domestic sales 24,366 17,039 43.0 24,484 -0.5 104,729 80,227 30.5

    Total Sales 336,840 312,188 7.9 319,292 5.5 1,644,562 1,572,790 4.6

    Total Domestic Sales 161,713 168,028 -3.8 149,537 8.1 857,713 956,044 -10.3

    Total Exports 175,127 144,160 21.5 169,755 3.2 786,849 616,746 27.6

    Exports as % of sales 52.0 46.2 581 bps 53.2 117 bps 47.8 39.2 863 bps

    Source: Company, Siam

    ero MotoCorp: Sales volumes

    404

    409

    565

    473

    462

    495

    450

    456

    506

    537

    480

    473

    499

    5660

    61

    57

    63

    66

    55

    6865 66

    6157 59

    0

    10

    20

    30

    4050

    60

    70

    80

    0

    100

    200

    300

    400

    500

    600

    Aug'13

    Oct'13

    Dec'13

    Feb'14

    Apr'14

    Jun'14

    Aug'14

    ('000s)

    ('000s)

    Motorcycles Scooters

    urce: Siam, ICICIdirect.com Research

    ajaj Auto: Sales volumes

    279 324348

    279

    261281

    273

    271 300313

    262

    268284

    34

    44 37

    32

    37 37403432 38

    43 51 53

    5253

    4444

    45

    39

    4543

    51

    43

    36

    40

    46

    0

    50

    100

    150

    200

    250

    300

    350

    400

    Aug'13

    Oct'13

    Dec'13

    Feb'14

    Apr'14

    Jun'14

    Aug'14

    ('000s)

    30

    35

    40

    45

    50

    55

    (%)

    Two-Wheelers Three-Wheelers % exports

    ource: Siam, ICICIdirect.com Research

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    TVS Motors (TVSSUZ) Overall sales at ~2.3 lakh units grew ~46% YoY, with the moped

    segment growing ~32% YoY growth on a low base while other

    segments boosted by new launches have also done well.

    Motorcycle volumes grew ~36% YoY while the scooter segment

    saw sustained momentum and grew ~84% YoY

    The moped segment has witnessed growth with an overall

    improvement in the demand scenario. However, the segment that

    has hitherto been in a downturn till last year is seeing an increase

    in demand and is up ~10% YTD

    Export markets have continued to do well for TVS with the

    segment growing ~28% YoY for the month. Three-wheeler

    exports at ~8000 units grew ~32% YoY and have driven the sharp

    growth in 3-W volumes this year

    Exhibit 9:

    Volume performance (in units)

    Segment Aug-14 Aug-13 %chg Jul-14 %chg YTD'15 YTD'14 %chgMotorcycles 83,332 61,313 35.9 76,767 8.6 393,982 312,669 26.0

    Scooters 67,240 36,478 84.3 60,619 10.9 284,376 175,501 62.0

    Mopeds 67,090 50,678 32.4 56,742 18.2 311,603 284,169 9.7

    Total 2-W Sales 217,662 148,469 46.6 194,128 12.1 989,961 772,339 28.2

    3-Wheelers 9,820 7,063 39.0 8,964 9.5 43,766 31,363 39.5

    Total Sales 227,482 155,532 46.3 203,092 12.0 1,033,727 803,702 28.6

    Exports(incl. in above) 35,074 27,425 27.9 36,986 -5.2 169,623 125,724 34.9

    Exports as % of sales 16.1 18.5 19.1 - 17.1 16.3

    Source: Company, Siam

    Honda Motorcycles and Scooters India (HMSI)

    Overall sales have continued to grow strongly (~26% YoY) led bystrong scooter volumes as demand continues to be strong in the

    segment. HMSI has benefitted by expanding its distribution

    network and production volumes

    Motorcycle segments have seen muted growth with ~4% YoY

    growth overall, with domestic volumes growing ~6% YoY while

    the scooter segment grew 48% YoY and has continued to

    outperform the industry with strong growth momentum

    Export markets have also done well but with HMSIs focus more

    firm on the domestic markets, the segment remains a small part of

    HMSIs volume pie (~4%)

    Exhibit 10:

    Volume performance (in units)

    Segment Aug-14 Aug-13 %chg Jul-14 %chg YTD'15 YTD'14 %chg

    Motorcycles 162,715 156,629 3.9 157,746 3.2 769,966 639,426 20.4

    Scooters 225,308 152,303 47.9 223,665 0.7 992,275 697,363 42.3

    Total Sales 388,023 308,932 25.6 381,411 1.7 1,762,241 1,336,789 31.8

    Exports(incl.above) 17,152 17,242 -0.5 12,000 42.9 68,248 57,645 18.4

    Exports as % of sales 4.4 5.6 -116 bps 3.1 -315 bps 3.9 4.3 -44 bps

    Source: Company, Siam

    VS Motors : Scooter sales volumes

    61 8

    382

    61

    58 6

    563 6

    8 74 8

    575

    77 8

    3

    36

    43

    42

    38

    42 4

    542 4

    8 46

    54

    57 6

    1 675

    1

    63

    46

    56

    60 69 66 7

    3

    6

    3 62

    62 5

    7 67

    0

    40

    80

    120

    160

    200

    240

    Aug'13

    Oct'13

    Dec'13

    Fe

    b'14

    Apr'14

    Jun'14

    Aug'14

    (%)

    Motorcycles Scooters Mopeds

    urce: Siam, ICICIdirect.com Research

    MSI: Motorcycles scooter sales volumes

    157

    163

    183

    151

    125 1

    63

    152 1

    90

    138

    160

    151

    158

    153

    152

    166

    193

    168

    171

    181

    176

    202

    176

    195

    172

    224

    218

    0

    50

    100

    150

    200

    250

    300

    350

    400

    450

    Aug'13

    Sep'13

    Oct'13

    Nov'13

    Dec'13

    Jan'14

    Fe

    b'14

    Mar'14

    Apr'14

    May'14

    Jun'14

    Ju

    l'14

    Aug'14

    (000s)

    Motorcycles Scooters

    urce: Siam, ICICIdirect.com Research

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    Exhibit 12:

    Market share movement in A2 segment

    38.441.0

    30.5

    56.452.6

    64.3

    0

    10

    20

    30

    40

    50

    60

    70

    Aug-1

    2

    Sep-1

    2

    Oct-12

    Nov-1

    2

    Dec-1

    2

    Jan-1

    3

    Fe

    b-1

    3

    Mar-13

    Apr-13

    May-1

    3

    Jun-1

    3

    Ju

    l-13

    Aug-1

    3

    Sep-1

    3

    Oct-13

    Nov-1

    3

    Dec-1

    3

    Jan-1

    4

    Fe

    b-1

    4

    Mar-14

    Apr-14

    May-1

    4

    Jun-1

    4

    Ju

    l-14

    Aug-1

    4

    (%)

    Hyundai Maruti

    Source: Siam, Top two PV OEMs considered

    Exhibit 13:Domestic market share movement in commercial vehicles

    12.3

    22.4

    52.7

    12.512.8

    25.4

    47.5

    14.313.3

    25.4

    47.5

    13.8

    0

    10

    20

    30

    40

    50

    60

    ALL M&M Tata Motors Others

    (%)

    Aug-13 Jul-14 Aug-14

    Source: Siam Data used is YTD

    Exhibit 14:Segmental share in CVs

    30.0

    37.335.1

    70.0

    62.764.9

    0

    10

    20

    30

    40

    50

    60

    70

    80

    Sep-1

    2

    Oct-12

    Nov-1

    2

    Dec-1

    2

    Jan-1

    3

    Fe

    b-1

    3

    Mar-13

    Apr-13

    May-1

    3

    Jun-1

    3

    Ju

    l-13

    Aug-1

    3

    Sep-1

    3

    Oct-13

    Nov-1

    3

    Dec-1

    3

    Jan-1

    4

    Fe

    b-1

    4

    Mar-14

    Apr-14

    May-1

    4

    Jun-1

    4

    Ju

    l-14

    Aug-1

    4

    (%)

    M&HCV LCV

    Source: Siam

    The A2 segment is the bread and butter category of the

    passenger car segment. The segment had seen a drop in

    volumes owing to a lack of options among diesel variants.

    As discretionary consumption spending increases, the

    segment will see a definitive improvement in volumes

    Despite a slowdown in the M&HCV segment, LCVs had

    continued to buck the trend and managed to grow.

    However, in the past quarter, LCVs have also witnessed a

    drop in volumes as the overall economic scenario has

    shown little signs of improvement. Going ahead, with an

    improvement in sentiment and a pick-up in

    economic/industrial activity levels, we believe the CV

    segment will pick up

    The outperformance of the LCV segment in the past year,

    coupled with a decline in the M&HCV segment has enabled

    the LCV/MHCV ratio to quickly reach the 70:30 mark that is

    the norm in most countries

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    Maruti Suzuki India (MARUTI)

    Maruti Suzukis overall volumes have grown ~27% YoY and

    ~10% MoM. Domestic volumes have grown ~30% YoY (on the

    low base of last year) and have significantly outperformed the

    domestic PV segment, which has grown ~5% YoY The A segment, viz. Alto, Wagon-R and Swift (including the Dzire

    as per the new Siam classification) has grown ~34% YoY. Ertiga

    has also seen strong growth in volumes for the month at ~5500

    units, ~20% YoY increase

    Exports grew sharply by ~27% YoY to ~12,500 units

    Exhibit 15:Volume performance in units)

    Segment Aug-14 Aug-13 %chg Jul-14 %chg YTD'15 YTD'14 %chg

    M800* 0 1,522 -100.0 0 NA - 7,826 -100.0

    Omni, Eeco,Versa 9,990 7,956 25.6 11,680 -14.5 50,501 38,200 32.2

    Alto, Wagon-R, Zen,

    Swift,Ritz, Celerio, Dzire 81,445 61,009 33.5 53,915 51.1 310,435 259,520 19.6

    SX4, Swift Dzire Tour 1,378 968 42.4 18,867 -92.7 71,715 67,216 6.7

    Total Passengers 92,813 71,455 29.9 84,462 9.9 432,651 372,762 16.1

    Gypsy, Vitara,Ertiga 5,491 4,563 20.3 5,631 -2.5 26,389 23,747 11.1

    Total Domestic 98,304 76,018 29.3 90,093 9.1 459,040 396,509 15.8

    Exports 12,472 11,305 10.3 11,287 10.5 53,010 40,547 30.7

    Total Sales 110,776 87,323 26.9 101,380 9.3 512,050 437,056 17.2

    Exports as % of sales 11.3 12.9 11.1 10.4 9.3

    Source: Company, Siam. * estimates

    Tata Motors (TELCO)

    Tata Motors volumes continued to remain under pressure with

    total sales of 40,883 units, a decline of ~18% YoY but an MoM

    increase of ~2%

    For Tata Motors, the domestic CV segment declined ~20% YoY,

    even after echoing the poor demand scenario. The PV segment

    has also been struggling and saw a decline of ~10% YoY.

    However, the M&HCV segment grew ~16% indicating the

    bottoming of demand after nearly three years of downturn

    For August, JLR volumes grew only 2.4% YoY to ~31,650 units

    reflecting strong demand for its products across geographies

    Exhibit 16:Volume performance (in units)

    Segment Aug-14 Aug-13 %chg Jul-14 %chg YTD'15 YTD'14 %chg

    Domestic MHCV sales 10,765 9,297 15.8 11,307 -4.8 52,647 53,319 -1.3

    Domestic LCV Sales 18,766 27,717 -32.3 18,778 -0.1 91,554 140,115 -34.7

    Domestic Pass.Car Sales 8,482 9,561 -11.3 6,949 22.1 34,587 48,190 -28.2

    Domestic UV Sales 2,870 3,036 -5.5 2,585 11.0 11,886 12,604 -5.7

    Exports 4,480 4,894 -8.5 4,363 2.7 19,070 20,606 -7.5

    Total Sales 40,883 49,611 -17.6 39,619 3.2 190,674 254,251 -25.0

    Jaguar Sales 4,658 5,222 -10.8 7,408 -37.1 31,650 30,973 2.2

    Landrover Sales 26,992 25,673 5.1 32,059 -15.8 154,623 125,704 23.0

    Total JLR Sales 31,650 30,895 2.4 39,467 -19.8 186,273 156,677 18.9

    Source: Company, Siam *JLR February data is as per estimates

    aruti Suzuki India: sales volumes

    105

    105

    92

    91 1

    02

    109

    113

    86 1

    01 1

    13

    101

    111

    87

    12.913.9

    8.6

    7.2

    4.85.7

    8.6

    9.8

    8.2

    10.310.511.111.3

    0

    20

    40

    60

    80

    100

    120

    Aug'13

    Oct'13

    Dec'13

    Feb'14

    Apr'14

    Jun'14

    Aug'14

    ('000s)

    0

    2

    4

    6

    810

    12

    14

    16

    (%)

    Total Sales Export %

    urce: Siam, ICICIdirect.com Research

    ta Motors: Domestic sales volume

    37.0

    37.0

    37.0

    30.1

    28.4

    29.1

    28.2 3

    8.1

    26.1

    28.2 3

    7.5

    38.3

    37.5

    12

    .6

    13

    .4

    14.7

    10.7

    9.5 1

    1.4

    11.8

    13.1

    7.8 9

    .3

    8.4 9.

    5

    11

    .4

    0

    10

    20

    30

    40

    50

    60

    Aug'13

    Oct'13

    Dec'13

    Feb'14

    Apr'14

    Jun'14

    Aug'14

    (000s)

    CV Sales PV Sales

    urce: Company, ICICIdirect.com Research

    guar Land Rover sales volume

    38

    .6

    39

    .0 43

    .3

    30

    .9 35

    .9

    36

    .2 40

    .7

    38

    .640

    .1

    39

    .0

    36

    .0 39

    .5

    31

    .7

    0

    20

    40

    60

    80

    100

    Aug'13

    Sep'13

    Oct'13

    Nov'13

    Dec'13

    Jan'14

    Fe

    b'14

    Mar'14

    Apr'14

    May'14

    Jun'14

    Ju

    l'14

    Aug'14

    (

    )

    10

    15

    20

    25

    30

    35

    40

    45

    50

    55

    60

    (000's

    )

    % Jaguar % LR JLR total volumes(RHS)

    rce: Company, ICICIdirect.com Research

  • 8/10/2019 IDirect_Motogaze_Sept14

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    Page 10

    Mahindra and Mahindra (MAHMAH)

    M&Ms volumes have underperformed the overall industry. Its

    core UV segment declined ~12% YoY while the overall UV

    segment (including exports) has grown ~22% YoY. However, ex-

    Mobilio, the segment is up ~4% YoY, thus indicating the need for

    faster launch of new models for the segment Old warhorses Bolero and Scorpio (together contributing over

    10,000 units) continued to drive the bulk of volumes for M&M even

    as newer products have struggled to maintain their expected run

    rates. The Verito family has seen a continued slump in volumes

    despite the launch of Verito Vibe. Automotive exports saw a

    decline of ~26% YoY

    The farm equipment segment has been doing well for M&M in the

    past year. However, fears of lower than average monsoons are

    likely to have dented domestic volumes, which have remained flat

    for the month at ~13,700 units. Tractor exports, however, have

    improved and increased 107.3% YoY, ~24% MoM to 1028 units

    Ashok Leyland (ASHLEY)

    Ashok Leylands (ALL) overall volumes have grown handsomely

    by ~16% YoY. The M&HCV segment continued to show an

    improvement in volumes (~2% MoM growth, ~18% YoY) while

    the LCV segment saw volumes at ~2450 units, up ~11% YoY

    The M&HCV goods segment saw ~37% YoY growth while the

    M&HCV passenger segment witnessed a decline of ~8% YoY.

    Exports have seen strong volume offtake and grew ~75% YoY to

    ~1000 units

    Exhibit 17:

    Volume performance (in units)

    Segment Aug-14 Aug-13 %chg Jul-14 %chg YTD'15 YTD'14 %chg

    UVs 13,870 15,821 -12.3 14,420 -3.8 80,508 91,575 -12.1

    4-Wheeler pickups 12,975 13,718 -5.4 12,472 4.0 64,098 70,481 -9.1

    M & HCV 597 471 26.8 725 -17.7 3,913 3,800 3.0

    Verito+Verito Vibe 270 955 -71.7 288 -6.3 1,353 4,343 -68.8

    Total 4wheeler Sales 27,712 30,010 -7.7 27,905 -0.7 149,872 165,856 -9.6

    3-Wheeler 5,433 5,149 5.5 5,142 5.7 22,383 22,006 1.7

    Total Domestic Auto Sales 33,145 35,159 -5.7 33,047 0.3 172,255 187,862 -8.3

    Exports 2,030 2,738 -25.9 2,520 -19.4 11,101 10,115 9.7

    Total Auto Sales 35,175 37,897 -7.2 35,567 -1.1 183,356 197,977 -7.4

    Exports as % of sales 5.8 7.2 7.1 6.1 5.1

    Tractors - Domestic 13,733 13,543 1.4 16,379 -16.2 102,032 102,704 -0.7 - Exports 1,273 615 107.0 1,028 23.8 4,936 4,500 9.7

    Total Tractors 15,006 14,158 6.0 17,407 -13.8 106,968 107,204 -0.2

    Exports as % of sales 8.5 4.3 5.9 4.6 4.2

    Source: Company, Siam

    Exhibit 18:

    Volume performance (in units)Segment Aug-14 Aug-13 %chg Jul-14 %chg YTD'15 YTD'14 %chg

    M&HCV Passenger 1,869 2,037 -8.2 1,547 20.8 7,367 10,158 -27.5 oo s , , 36.7 , - . 19,123 15,907 20.2

    LCV 2,451 2,200 11.4 2,061 18.9 9,475 11,504 -17.6

    Passenger Vehicles 50 0 NA 50 0.0 169 - NA

    Total Sales 8,336 7,139 16.8 7,817 6.6 36,134 37,569 -3.8

    Exports 1,010 577 75.0 884 14.3 4,431 3,615 22.6

    Exports as % of sales 12.1 8.1 11.3 12.3 9.6

    Source: Company, Siam

    hindra and Mahindra: Sales volume

    37

    .9 43

    .3

    50

    .6

    39

    .3

    39

    .6 42

    .7

    42

    .2

    51

    .6

    36

    .337

    .9

    38

    .5

    35

    .6

    35

    .2

    15

    20

    25

    30

    35

    40

    45

    50

    55

    Aug'13

    Sep'13

    Oct'13

    Nov'13

    Dec'13

    Jan'14

    Fe

    b'14

    Mar'14

    Apr'14

    May'14

    Jun'14

    Ju

    l'14

    Aug'14

    (

    )

    rce: SIAM, ICICIdirect.com Research

    hindra and Mahindra: Tractor sales

    14

    .2

    26

    .6

    38

    .3

    23

    .1

    17

    .0 20

    .1

    17

    .6

    17

    .7 20

    .7 23

    .9 29

    .9

    17

    .4

    15

    .0

    0

    5

    10

    15

    20

    25

    30

    3540

    Aug'13

    Sep'13

    Oct'13

    Nov'13

    Dec'13

    Jan'14

    Fe

    b'14

    Mar'14

    Apr'14

    May'14

    Jun'14

    Ju

    l'14

    Aug'14

    (000s)

    rce: SIAM, ICICIdirect.com Research

    hok Leyland: Total sales

    4.9

    4.7

    4.1

    2.7 3

    .9 5.5

    5.5

    7.7

    4.5 4

    .9 5.5

    5.75.8

    2.2 2.5

    2.3

    2.5

    2.3

    2

    .2

    2

    .3

    2.5

    1.3 1

    .7 1.9

    2

    .1 2.5

    0

    2

    4

    6

    8

    10

    12

    Aug'13

    Sep'13

    Oct'13

    Nov'13

    Dec'13

    Jan'14

    Feb'14

    Mar'14

    Apr'14

    May'14

    Jun'14

    Jul'14

    Aug'14

    (000's)

    M&HCV LCV

    rce: Siam, ICICIdirect.com Research

  • 8/10/2019 IDirect_Motogaze_Sept14

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    Page 11

    News & views

    Maruti Suzuki opened bookings for the upcoming Ciaz sedan onSeptember 5. Since then, it has already received 3,000 orders and 10,000

    inquiries. With an expected launch in the first week of October, the Ciaz

    will be available in both petrol and diesel engine options. Maruti Suzuki

    has claimed that the Ciaz will be the most fuel efficient sedan in thecountry. While the petrol variant would give a mileage of 20.7 kmpl, the

    diesel variant mileage is expected to be 26.2 kmpl

    Bajaj Auto has launched the KTM RC series of super sports motorcyclesRSC 390 and RC 200. The bikes have been launched at introductory prices

    of | 1.60 lakh for RC 200 and | 2.05 lakh for RC 390 (ex-showroom, Delhi)

    Hero MotoCorp plans to invest | 1,600 crore to set up a newmanufacturing plant in southern India. As per sources, Hero MotoCorp has

    signed a preliminary agreement with the Andhra Pradesh government to

    set up the plant, spread across 600 acres, which can produce up to 1.8

    million vehicles annually.

  • 8/10/2019 IDirect_Motogaze_Sept14

    12/14ICICI Securities Ltd.|Retail Equity Research

    Page 12

    ICICIdirect.com Research Universe (Auto & Auto ancillary)CMP M Cap

    (|) TP(|) Rating (| Cr) FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E

    Amara Raja (AMARAJ) 636 590 Hold 10,855 21.5 25.4 33.7 29.5 25.0 18.8 15.6 12.1 9.0 34.3 33.1 33.9 27.0 25.3 26.1

    Apollo Tyre (APOTYR) 211 270 Buy 10,619 20.0 21.8 24.5 10.6 9.7 8.6 6.3 6.0 5.4 23.7 20.2 19.1 22.0 19.6 18.2

    Ashok Leyland (ASHLEY) 42 32 Hold 11,922 0.1 0.2 1.5 381.8 180.1 28.9 84.5 19.7 10.6 NM 2.7 8.7 0.7 1.3 7.6Bajaj Auto (BAAUTO) 2,334 2,400 Buy 67,551 112.1 124.1 153.3 20.8 18.8 15.2 12.8 11.4 8.8 40.6 37.8 40.1 33.8 32.2 33.5

    Balkrishna Ind. (BALIND) 792 870 Buy 7,657 50.5 54.8 67.0 15.4 14.2 11.6 11.0 9.1 7.1 17.2 17.1 19.7 25.9 17.2 17.1

    Bosch (MICO) 14,963 15,450 Hold 46,984 281.8 366.3 492.2 48.6 37.4 27.9 31.4 25.2 18.4 14.1 16.0 18.2 14.1 15.8 19.5

    Eicher Motors (EICMOT)` 12,175 13,000 Buy 32,884 145.9 262.9 384.0 83.4 46.3 31.7 46.1 21.7 14.3 18.3 25.1 29.7 19.2 26.9 29.5

    Escorts (ESCORT)* 157 103 Sell 1,867 20.5 11.9 17.1 5.7 9.9 6.8 4.1 5.9 4.4 13.7 8.3 10.7 13.4 7.3 9.7

    Exide Industries (EXIIND) 178 148 Hold 15,139 5.7 7.9 9.5 31.1 22.5 18.7 16.0 12.3 10.2 18.5 22.3 23.2 13.1 16.1 17.1

    Hero Mototcorp (HERHON) 2,809 2,600 Hold 56,093 105.6 136.4 173.3 26.6 20.6 16.2 13.0 14.6 13.5 43.4 49.2 53.6 37.7 40.8 43.0

    JK Tyre & Ind (JKIND) 390 477 Buy 1,599 58.0 85.4 109.4 6.7 4.6 3.6 4.3 4.0 3.4 19.2 20.0 21.8 24.0 25.9 25.4

    M&M (MAHMAH) 1,364 1,322 Hold 80,537 56.5 67.8 72.7 24.1 20.1 18.8 15.5 12.3 11.0 18.5 20.4 19.8 22.1 20.2 18.6

    Mahindra CIE (MAHAUT)* 210 175 Buy 6,833 1.5 6.4 10.1 144.7 32.7 20.8 14.0 10.1 8.0 2.0 8.2 12.6 4.7 8.0 11.7

    Maruti Suzuki (MARUTI) 2,974 2,450 Hold 89,874 92.1 105.1 144.1 32.3 28.3 20.6 13.4 11.8 8.8 13.3 13.5 16.9 13.3 13.4 15.9

    Motherson (MOTSUM) 437 360 Hold 38,539 8.7 14.6 22.2 50.3 29.8 19.7 12.6 9.3 6.9 24.2 32.1 36.4 25.9 36.5 40.3

    Tata Motors (TELCO) 508 560 Buy 157,021 43.3 61.6 73.5 10.3 7.3 6.1 4.6 4.0 3.4 21.7 23.2 23.2 21.3 23.7 22.5

    Wabco India (WABTVS) 3,850 3,700 Hold 7,315 62.0 79.2 137.0 62.1 48.6 28.1 36.4 27.0 16.8 15.6 16.9 23.0 17.7 20.7 27.6

    Sector / Company

    RoE (%)EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)

    Source: ICICIdirect.com Research *Year ending September

  • 8/10/2019 IDirect_Motogaze_Sept14

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    Page 13

    Exhibit 19:

    Auto raw material index

    190

    210

    80

    100

    120

    140

    160

    180

    200

    220

    240

    Feb-09

    Jul-09

    Dec-09

    May-10

    Oct-10

    Mar-11

    Aug-11

    Jan-12

    Jun-12

    Nov-12

    Apr-13

    Sep-13

    Feb-14

    Jul-14

    Source: Bloomberg, Reuters, Company, ICICIdirect.com Research

    Exhibit 2 :Currency movements

    80

    90

    100

    110

    120

    130

    140

    150

    160

    Jun-11

    Sep-11

    Dec-11

    Mar-12

    Jun-12

    Sep-12

    Dec-12

    Mar-13

    Jun-13

    Sep-13

    Dec-13

    Mar-14

    Jun-14

    US$INR US$JPY US$EUR

    Volatility in the currency markets is impacting raw material prices for companies with

    imported components and lower natural hedges.

    Source: Company, ICICIdirect.com Research

    The in-house raw material index reflects the combination of

    various input materials (steel, rubber, aluminium, plastics)

    for OEMs, which have February 2009 as base year at 100.

    The chart shows a declining trend in raw material prices,

    which is a positive for the industry.

  • 8/10/2019 IDirect_Motogaze_Sept14

    14/14

    ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns

    ratings to its stocks according to their notional target price vs. current market price and then categorises them

    as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional

    target price is defined as the analysts' valuation for a stock.

    Sector view:

    Over weight compared to index

    Equal weight compared to index

    Under weight compared to index

    Index here refers to BSE 500

    Pankaj Pandey Head Research [email protected]

    ICICIdirect.com Research Desk

    ICICI Securities Limited

    1st Floor, Akruti Trade Centre,Road No 7, MIDC,Andheri (East)

    Mumbai 400 093

    [email protected]

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