India Automobiles Sales - August 2010 - Strong sales in seasonally weak month - Elara Capital

India Automobiles

Strong sales in seasonally weak month

Tata Motors

M&HCV sales at ~ 15 thousand units were a tad below expectations of close to 16 thousand units. Passenger car sales at ~ 22 thousand were disappointing given the current strong sentiment in the PC sales in general and expected increase in Nano dispatches on the back of ramp of Sanand plant. However, in the overall company context it does not have significant implications as JLR and M&HCV are expected to drive the growth momentum for Tata Motors in that order. We continue to remain positive on the stock.

Maruti Suzuki

Maruti Suzuki's (MSIL) August'10 sales at ~ 105 thousand units were in-line with our expectations. The C segment's (Omni, Versa and Eeco) contribution has now jumped to 13.5% of total MSIL sales from 8% at the same time last year on the back of growing Eeco sales. A2 segment which makes up close to 63% total MSIL sales continues to register healthy numbers. However, we continue to remain negative on the stock as we do not see the volume growth to trickle down to margins and eventually to net profits. The margins would to be under pressure from higher royalty costs, unfavourable currency movement.

Hero Honda

Hero Honda's August'10 sales at ~425 thousand units were in-line with our expectations. The company faced serious capacity constraints in last few months and majority of it was due to supplies from few key vendors.

HH is trading at 13x FY12 earnings vis-à-vis 16.4x for Bajaj Auto. We expect this gap to narrow over a period of time and maintain our positive stance on the company.

Bajaj Auto

Bajaj Auto's (BAL) August'10 domestic motorcycle sales (derived) at ~ 210 thousand units were above our expectations of 200 thousand units. We expect the company to maintain 210 thousand a month sales run-rate for domestic motorcycle for rest of FY11, with sales peaking out in the coming festival season.

Source : Equity Bulls

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