Auto Sector Review - May 2012 - Destimoney Securities Ltd.

- May 2012 continued with the lull in the auto sector. The steep increase in petrol price hike added to the concerns of the auto companies.

- In case passenger vehicles segment, all auto majors except Mahindra and Mahindra, Toyota Kirloskar and Honda Siel witnessed muted growth or fall in vehicle sales on yearly basis.

- LCV sales remained relatively strong in commercial vehicle segment.

- Two wheeler majors continued to witness moderation in growth rates, except Honda Motorcycles and Scooters India (HMSI).

- Maruti Suzuki India Limited signed state support agreement (SSA) with the Government of Gujarat for purchase of land near Mehsana to set up a new manufacturing facility. It aims to set up 250,000 vehicles manufacturing plant in Gujarat with an investment of Rs.40 bn.

- On May 24, 2012, oil marketing companies announced a hike of Rs.7.54 per liter in petrol price, which was partially rolled back due to public protest. Central government has appealed the state governments to reduce the taxes to dilute the impact on retail consumer.

- Auto majors like Tata Motors, Mahindra & Mahindra and Bajaj Auto reported their Mar'12 quarters results during May'12. The companies expects slow down for the auto sector except LCV and UV segments.

- Due to favorable pricing of diesel as a fuel, there is consistent demand for UV segment vehicles (most of them being diesel based) and hence, Mahindra & Mahindra remains our pick in Auto sector.

Source : Equity Bulls

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