Two-wheeler majors hike vehicle prices - Angel Broking

Major two-wheeler manufacturers like Hero MotoCorp (HMCL), Bajaj Auto (BJAUT) and India Yamaha Motors (IYM) have increased the vehicle prices by Rs. 160 to Rs. 5,000 depending upon the models. The prices have been increased to mitigate the cost pressures on account of the unfavorable forex movement. While, BJAUT has hiked prices by Rs. 500 to Rs. 5,000, HMCL has increased prices by Rs. 500 to Rs. 1,000 and IYM has resorted to a modest increase of Rs. 160 to Rs. 400, as it had hiked vehicle prices about three months back by a similar quantum. We do not see a material impact of the price increases on the demand considering that the quantum of the price increase is small and also due to the fact that good monsoons is expected to lead to a healthy rural demand going ahead.

Meanwhile, the government has decided to provide more capital to public sector banks to help them offer loans at cheaper interest rates to consumers buying twowheelers and select consumer durables. While, we see this as a positive development for the two-wheeler industry, the quantum of reduction in interest rates would be the key thing to watch out for. We would be watchful of the developments on this front and would revise our volume estimates accordingly. At the current market price, BJAUT and HMCL is trading at 14.9x and 13.7x FY2015E earnings. Due to limited upside from current levels, we maintain our Neutral rating on BJAUT and HMCL.

Source : Equity Bulls

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