Automobile Sector - Sluggish trend continues - December 2013 Sales Update - Angel Broking

Auto volumes remained muted in December as demand across the segments (except tractors and domestic passenger cars) continued to be impacted by slowdown in industrial activity, high inflation levels and increasing fuel prices. During the month, commercial (CV) and utility vehicle (UV) segments witnessed a steep decline, while demand for two-wheelers remained muted. The tractor segment though continued its strong growth traction led by strong rural demand. The domestic passenger car (PC) sales too posted a growth led by new launches and pick-up in petrol sales. Going ahead, we expect tractor and two-wheeler sales to remain healthy backed by rural demand; however, demand in the CV and passenger vehicle (PV) segments is expected to remain subdued in the near term.

Tata Motors (TTMT) registered a dismal performance yet again as the domestic CV and PV volumes continued to contract following weak consumer demand, slowdown in industrial activity and increasing competition. Total volumes declined steeply by 42.3% yoy with the domestic CV and PV segments registering a sharp decline of 45.8% and 34.6% yoy respectively.

Ashok Leyland (AL) registered a 16.7% mom growth in volumes, slightly ahead of our estimates, as the medium and heavy commercial vehicle (MHCV) sales recovered (up 43.3% mom) after a steep decline witnessed in November. On a yoy basis though, the performance continues to remain weak and posted a sharp decline of 14% yoy.

Maruti Suzuki (MSIL) posted lower-than-expected volumes, which declined by 4.4% yoy (1.3% mom), primarily led by a steep fall of 67% yoy in exports. The domestic growth at 5.5% yoy (1.3% mom), however, was broadly in-line with our estimates. The domestic performance continues to be driven by pick-up in the Mini segment which grew strongly by 16.7% yoy. The super compact segment too maintained its momentum, registering a strong growth of 18% yoy (0.9% mom) despite stiff competition from the Amaze (Honda). The compact and utility vehicle segments, however continues to post sluggish volumes.

Mahindra & Mahindra (MM) reported slightly lower-than-expected volumes as better-than-expected performance in tractor sales was offset by continued weakness in the automotive segment led by significant slowdown in utility vehicle sales. Total volumes declined 5.7% yoy (9.2% mom) during the month. The tractor segment sustained its strong growth traction reporting an increase of 15.4% yoy on the back of good monsoons and better farm output. The automotive segment (down 12.6% yoy) however, continued to report disappointing performance led by a sharp decline of 27.8% yoy in PV sales.

Two-wheelers and three-wheelers: Bajaj Auto (BJAUT) reported a disappointing performance for the month with total sales posting a significant decline of 13.4% yoy (4.1% mom) led by continued weakness in domestic sales. Exports though continued with their strong traction, witnessing a robust volume growth of 19.6% yoy (12.7% mom). Hero MotoCorp (HMCL) reported a 3.1% yoy decline in total volumes to 524,990 units, which was in line with our estimates. TVS Motor (TVSL) reported in-line volumes with total sales posting a modest growth of 2.1% yoy as domestic sales witnessed a decline of 1.7% yoy. Nevertheless, the export performance continued its strong traction, registering a growth of 27.4% yoy driven by 20.5% and 65.6% yoy growth in two-wheeler and three-wheeler sales respectively.

Source : Equity Bulls

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