Automobile Monthly - December 2011 - Slowdown creeping - MSFL Research

Indian automobile players recorded tepid growth (except M&M & TTMT) in December which is seasonally the weakest month for the industry before the end of calendar year. New launches in the PC segment, increasing discounts and attractive financing scheme supported dispatches for several unlisted players, however we believe sales volume to remain under pressure in the later part of the year. Tata Motors recorded strong growth as PC sales grew on the back of new launches while M&M continued its strong traction in the UV & CV segment. The two wheeler companies painted a mixed bag with Hero delivering strong volumes while Bajaj and TVS Motors showed first signs of slowdown. So while M&M, Tata Motors, Hero Motocorp and Bajaj Auto clocked growth on y-o-y basis Maruti Suzuki & TVS Motors reported a decline.

Bajaj Auto: Bajaj Auto's December sales stood at 305,690 units represents growth of 10% on y-o-y basis and down 18% sequentially. The sales represent the slowest during the current year FY 2012. The export market grew 10% y-o-y to 119,708 units again the lowest in FY 12.

TVS Motor: TVS reported negative sales growth of 1% y-o-y to 170,428 due to high base effect and lower than management guidance.

Hero MotoCorp: Hero MotoCorp recorded another month of robust sales, we however expect competition to further intensify in FY13.

Mahindra and Mahindra: Mahindra & Mahindra continues to grow across segments, with total vehicle sales up 17% y-o-y to 59,150 units driven by higher automotive segment (especially LCV segment).

Tata Motors: Total vehicle sales grew the strongest 22% to 82,278 units driven by higher LCV and passenger car sales (positive surprise).

Maruti Suzuki: Total vehicle sales were down 7% y-o-y at 92,161 units due to multiple headwinds faced by the passenger car segment and diesel engine capacity constraints. Domestic passenger car sales number came in at 77,475 units down 13% y-o-y.

We list vehicle sales of other unlisted players to just give an idea of how competition is shaping up in the Indian automobile industry.

We remain positive on 2W industry on the back of rising rural demand, shift in consumer preference, new launches and expect Bajaj Auto to be primary beneficiary. Tata Motors (not rated) trades at favorable valuations with JLR recording strong volumes and domestic CV sales perform better than the peers. We remain cautious on passenger segment as macro uncertainties still persists and higher competition to impact MSIL sales. CV players especially in the M&H segment will face pressure due to general slowdown in the economy (especially in the construction & mining segment)

Source : Equity Bulls

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