Auto Sector. Mixed Performance due to Shifting of Festival. Institutional Equity Research. Monthly Round Up - Sep 18 October 03, 2018

Transcription

1 Mixed Performance due to Shifting of Festival Indian auto companies have delivered a mixed volume performance across segments barring CVs in Sept 18 owing to shift of festival this time and high base. Ongoing Pitru Paksha, which begun towards the end of the month and considered to be inauspicious, also impacted vehicle sales volume to some extent. However, strong industrial and infrastructure activities continued to boost CV demand. While the two-wheelers companies recorded a decent double-digit growth, PV segment recorded a marginal YoY decline in volume. Meanwhile, the tractor segment recorded double-digit decline on higher base. Looking ahead, we believe pre-festival inventory build-up would pick up from Oct 18 onwards. In two-wheeler segment, Bajaj Auto s sales grew by 17% YoY and 15% MoM to 5,02,009 units, Hero MotoCorp s sales grew by 7% YoY and 12% MoM to 7,69,138 units in the month, while TVS Motor s sales grew by 18% YoY and 24% MoM to 4,23,978 units. Amongst four-wheeler players, M&M s Auto volume rose by 3% YoY and 14% MoM to 55,022 units, Maruti Suzuki s volume declined by 0.5% YoY (+3% MoM) to 162,290 vehicles. While Ashok Leyland s volume grew by strong 26% YoY and 11.4% MoM to 19,373 units, Tata Motors volume grew by strong 21% YoY and 10% MoM to 69,848 units. In tractor segment, while M&M s tractor volume declined by 18% YoY (+111% MoM) to 37,581 units, Escorts volume increased by 3% YoY and 121% MoM to 10,617 units due to seasonality. Exhibit 1: Overall Volume Analysis Total Units Sales Sep 18 Sep 17 YoY YoY Bajaj Auto 502, , , ,566,085 1,959, Hero 769, , , ,238,996 3,876, MotoCorp TVS Motors 423, , , ,016,648 1,750, Maruti Suzuki 162, ,071 (0.5) 158, , , M&M Auto 55,022 53, , , , Volume M&M Tractors 37,581 45,563 (17.5) 17, , , Tata Motor 69,848 57, , , , Ashok Leyland 19,373 15, , ,085 69, Eicher Motors 6,663 6, , ,919 26, (CV) Escorts 10,617 10, , ,533 37, Domestic Vol for Following Cos Hyundai 47,781 50,028 (4.5) 45, , , Toyota 12,512 12, ,100 (11.3) 79,527 67, Ford 8,239 8,769 (6.0) 8, ,038 45, Honda 14,820 18,257 (18.8) 17,020 (12.9) 94,419 91, HMSI 555, ,888 (2.5) 577,249 (3.7) 3,315,392 3,146, Research Analyst: Mitul Shah Contact: (022) mitul.shah@relianceada.com 1 1

2 Two-wheeler Segment Bajaj Auto: Bajaj Auto (BJAUT.IN/BAJA.BO) sold 5,02,009 units in Sept 18 (+17% YoY and +15% MoM) on the back of strong performance across domestic 2W and exports. The Company recorded all-time high monthly volume across segments in Sept 18. Its domestic sales grew by 11% YoY and 22% MoM to 3,11,503 units owing to promotional activities and incentives on motorcycles, while exports rose by 30% YoY and 5% MoM to 190,506 units owing to improvement in middle-east countries amid rising crude price. Recently new markets like Cambodia, Ghana and Iraq etc. are contributing to aid growth in export volume. Exhibit 2: Bajaj Auto Units Sep 18 Sep 17 YoY Motorcycles 430, , , ,156,506 1,694, Domestic 273, , , ,287,133 1,010, Exports 157, , , , , Three Wheelers 71,070 59, ,169 (4.2) 409, , Domestic 38,474 34, , , , Exports 32,596 24, ,975 (11.8) 203, , Domestic Volume 311, , , ,493,310 1,147, Exports 190, , , ,072, , Total Volume 502, , , ,566,085 1,959, Hero MotoCorp: Hero MotoCorp (HMCL.IN/HROM.BO) sold 7,69,138 units in Sep 18 (+7% YoY and +12% MoM). For the fifth time overall and third in current fiscal (), the Company has crossed the 7,00,000 sales mark in a month aided by improving rural sales and higher growth of motorcycles. In Sept 18, HMCL commenced nationwide sales of its new premium motorcycle i.e. Xtreme 200R. It YoY plans to launch 2 new 125CC scooters in the upcoming festive season to scale-up its market share in scooter segment. The Company announced average price hike of Rs900/vehicle effective from Oct 18 to pass on RM cost inflation.. Exhibit 3: Hero Motorcorp Units Sep 18 Sep 17 YoY Exhibit 4: TVS Motor Units Sep 18 Sep 17 YoY YoY Motorcycles 166, , , , , Scooters 142, , , , , Mopeds 101,645 85, , , , Scooters/ Mopeds 244, , , ,134,476 1,013, Three Wheeler 13,282 8, , ,266 42, Total Sales 423, , , ,016,648 1,750, Two Wheelers 769, , , ,238,996 3,876, TVS Motor: TVS Motor (TVSL.IN/TVSM.BO) sold 4,23,978 units in Sep 18 (+18% YoY and +24% MoM). Its 3W sales grew by a strong 48% YoY (+1% MoM) to 13,282 units, which cushioned overall sales volume. Its 2W volume grew by 17% YoY and 24% MoM to 410,696 units, while motorcycle sales rose by 16% YoY and 26% MoM to 1,66,489 units. Domestic 2W volume grew by 18% YoY and 31% MoM, while its two-wheeler exports rose by 13% YoY (-9% MoM) to 49,560 units. Surprisingly, its moped sales grew by strong 19% YoY and 42% MoM to 1,01,645 units, recording an all-time high monthly volumes. Its export volume rose by a healthy double-digit in Sept 18. YoY 2 2

3 Four-wheeler Segment Maruti Suzuki: Maruti Suzuki (MSIL.IN/MRIT.BO) delivered a disappointing performance in Sept 18 as well. With a marginal 0.5% YoY decline (+3% MoM), its monthly vehicle sales stood at 162,290 units. In domestic PV segment, its sales rose by 1% YoY and 4% MoM, while exports fell by 25% YoY and 17% MoM to 8,740 units. The Management cited slow pick-up and shifting of festivals as key reasons for subdued volume performance. Its UV volume grew by 9% YoY and 20% MoM on the back of strong sales of Brezza. UV sale was also impacted by phasing out of old Ertiga, as we expect the Company to launch new Ertiga in upcoming festive season. Its Van volume rose by 7% YoY and 7% MoM. Mini segment (Alto and Wagon R) sales fell by 9% YoY and 3% MoM to 34,971 units, while its volume in Compact segment (Swift, Celerio, Ignis, D zire, Baleno) rose by 2% YoY and 4% MoM to 74,011 units. MSIL s Brezza has a waiting period of ~4-6 weeks currently, while overall sales growth appears to be slowing down. Exhibit 5: Maruti Suzuki Volume Analysis Units Sep 18 Sep 17 YoY YoY A: Mini (Alto,Wagon-R) 34,971 38,479 (9.1) 35,895 (2.6) 213, ,727 (2.8) A: Compact (Swift, 74,011 72, , , , Celerio, Ignis, Baleno, Dzire, Tour S) A: Mid-Size (CIAZ) 6,246 5, ,002 (10.8) 24,015 34,135 (29.6) Total A: Passenger Cars 115, ,886 (1.4) 114, , , B: Utility Vehicles (Gypsy, 21,639 19, , , , Ertiga, S-Cross, Vitara Brezza) C: Vans (Omni, Eeco) 14,645 13, , ,887 79, Domestic Passenger Vehicles 151, , , , , LCV (Super Carry) 2, , ,439 3, Total Domestic Sales 153, , , , , Export 8,740 11,671 (25.1) 10,489 (16.7) 56,087 60,857 (7.8) Total Sales 162, ,071 (0.5) 158, , , Mahindra & Mahindra (M&M): With 7% YoY decline, M&M s (MM.IN/MAHM.BO) combined volume (Auto+Tractor) came in at 92,603 units (+40% MoM due to seasonality of tractor segment). It sold 51,268 units in domestic automotive segment, recording growth of 2% YoY and 13% MoM. Its key volume contributor i.e. PV segment comprising of UV, MPV and PCs fell by 16% YoY (+8.4% MoM) owing to higher competition. Its LCV segment grew by 19% YoY and 14% MoM to 21,853 units, while exports grew by 17% YoY to 3,754 units. Its Tractor sales delivered disappointing performance as it declined by 18% YoY (+111% MoM) to 37,581 units. While domestic volume fell be 18% YoY and exports volume grew by 4% YoY in Sept 18. Exhibit 6: M&M Auto Volume Analysis Units Sep 18 Sep 17 YoY YoY PCs 1,526 1, ,866 (18.2) 9,999 7, Passenger UVs 19,885 24,109 (17.5) 17, , ,598 (2.5) 4-wheel pickups 21,223 17, , ,975 89, LCVs ,250 3, M&HCVs 1, ,148 (7.3) 6,242 3, Three Wheelers 6,940 5, , ,774 23, Total Domestic Sales 51,268 50, , , , Export 3,754 3, , ,676 12, Total Sales 55,022 53, , , , Exhibit 7: M&M Tractors Units Sep 18 Sep 17 YoY YoY Domestic 35,953 44,000 (18.3) 16, , , Exports 1,628 1, , ,567 7, Total Tractors 37,581 45,563 (17.5) 17, , ,

4 Tata Motors: Tata Motors (TTMT.IN/TAMO.BO) sold 69,848 units in Sept 18 (+21% YoY and +10% MoM). Its CV volume grew by 26% YoY and 16% MoM to 46,169 units, while PV sales grew by 7% YoY and flat MoM to 18,429 units led by success of Nexon. Its exports grew 35% YoY to 5,250 units in the month. Exhibit 8: Tata Motor Volume Analysis Units Sep 18 Sep 17 YoY YoY PVs 18,429 17, , ,865 81, CVs 46,169 36, , , , Domestic Sales 64,598 53, , , , Export Sales 5,250 3, ,478 (4.2) 27,654 19, Total 69,848 57, , , , Ashok Leyland: ALL sold 19,373 units in Sept 18 (+26% YoY and +11% MoM). Its LCV segment recorded volume of 5,141 vehicles, recording a growth of 44% YoY and 22% MoM, while M&HCV volume rose by 21% YoY and 8% MoM to 14,232 units. Looking ahead, the Management has indicated strong demand owing to higher infra spend and increased construction activities, which would aid M&HCV volume. Within M&HCV segment, tipper segment witnesses a strong growth. Eicher Motor: Eicher sold 6,663 units in Sep 18, up 10% YoY and 10% MoM. In domestic market, it sold 602 buses (-2% YoY and -6% MoM) and 5,158 trucks (+11% YoY and +19% MoM). Its exports grew by 6% YoY to 903 units. Exhibit 10: Eicher Motors Units Sep 18 Sep 17 YoY YoY Truck 5,158 4, , ,209 17, Bus (1.6) 640 (5.9) 5,969 5, Domestic Truck/Bus 5,760 5, , ,178 22, Exports ,105 (18.3) 4,741 3, Total Volume 6,663 6, , ,919 26, Tractor Segment Escorts: Escorts (ESC.IN/ESCO.BO) sold 10,617 units, grew 3% YoY and 121% MoM. Its domestic volume grew by 3% YoY and 122% MoM to 10,396 units, while exports fell by 6% YoY. Exhibit 9: Ashok Leyland Units Sep 18 Sep 17 YoY YoY M&HCV 14,232 11, , ,032 51, SCV/LCV 5,141 3, , ,053 18, Total Sales 19,373 15, , ,085 69, Exhibit 11: Escorts Units Sep 18 Sep 17 YoY YoY Domestic 10,396 10, , ,492 37, Exports , Total Tractors 10,617 10, , ,533 37,

5 Other Auto Players Exhibit 12: Domestic Sales performance of other Auto Players Units Sep 18 Sep 17 YoY YoY PVs Hyundai 47,781 50,028 (4.5) 45, , , Toyota 12,512 12, ,100 (11.3) 79,527 67, Ford 8,239 8,769 (6.0) 8, ,038 45, Honda 14,820 18,257 (18.8) 17,020 (12.9) 94,419 91, Two-wheelers HMSI 555, ,888 (2.5) 577,249 (3.7) 3,315,392 3,146, Suzuki 63,140 50, , , ,

6 Rating Guides Rating Expected absolute returns over 12 months BUY >10% HOLD -5% to 10% REDUCE >-5% Reliance Securities Limited (RSL), the broking arm of Reliance Capital is one of the India s leading retail broking houses. Reliance Capital is amongst India s leading and most valuable financial services companies in the private sector. Reliance Capital has interests in asset management and mutual funds, life and general insurance, commercial finance, equities and commodities broking, wealth management services, distribution of financial products, private equity, asset reconstruction, proprietary investments and other activities in financial services. The list of associates of RSL is available on the website RSL is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014 General Disclaimers: This Research Report (hereinafter called Report ) is prepared and distributed by RSL for information purposes only. The recommendations, if any, made herein are expression of views and/or opinions and should not be deemed or construed to be neither advice for the purpose of purchase or sale of any security, derivatives or any other security through RSL nor any solicitation or offering of any investment /trading opportunity on behalf of the issuer(s) of the respective security(ies) referred to herein. These information / opinions / views are not meant to serve as a professional investment guide for the readers. No action is solicited based upon the information provided herein. Recipients of this Report should rely on information/data arising out of their own investigations. Readers are advised to seek independent professional advice and arrive at an informed trading/investment decision before executing any trades or making any investments. This Report has been prepared on the basis of publicly available information, internally developed data and other sources believed by RSL to be reliable. RSL or its directors, employees, affiliates or representatives do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information / opinions / views. While due care has been taken to ensure that the disclosures and opinions given are fair and reasonable, none of the directors, employees, affiliates or representatives of RSL shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way whatsoever from the information / opinions / views contained in this Report. Risks: Trading and investment in securities are subject to market risks. There are no assurances or guarantees that the objectives of any of trading / investment in securities will be achieved. The trades/ investments referred to herein may not be suitable to all categories of traders/investors. The names of securities mentioned herein do not in any manner indicate their prospects or returns. The value of securities referred to herein may be adversely affected by the performance or otherwise of the respective issuer companies, changes in the market conditions, micro and macro factors and forces affecting capital markets like interest rate risk, credit risk, liquidity risk and reinvestment risk. Derivative products may also be affected by various risks including but not limited to counter party risk, market risk, valuation risk, liquidity risk and other risks. Besides the price of the underlying asset, volatility, tenor and interest rates may affect the pricing of derivatives. Disclaimers in respect of jurisdiction: The possession, circulation and/or distribution of this Report may be restricted or regulated in certain jurisdictions by appropriate laws. No action has been or will be taken by RSL in any jurisdiction (other than India), where any action for such purpose(s) is required. Accordingly, this Report shall not be possessed, circulated and/or distributed in any such country or jurisdiction unless such action is in compliance with all applicable laws and regulations of such country or jurisdiction. RSL requires such recipient to inform himself about and to observe any restrictions at his own expense, without any liability to RSL. Any dispute arising out of this Report shall be subject to the exclusive jurisdiction of the Courts in India. Disclosure of Interest: The research analysts who have prepared this Report hereby certify that the views /opinions expressed in this Report are their personal independent views/opinions in respect of the securities and their respective issuers. None of RSL, research analysts, or their relatives had any known direct /indirect material conflict of interest including any long/short position(s) in any specific security on which views/opinions have been made in this Report, during its preparation. RSL s Associates may have other potential/ material conflict of interest with respect to any recommendation and related information and opinions at the time of publication of research report. RSL, its Associates, the research analysts, or their relatives might have financial interest in the issuer company(ies) of the said securities. RSL or its Associates may have received a compensation from the said issuer company(ies) in last 12 months for the brokerage or non brokerage services.rsl, its Associates, the research analysts or their relatives have not received any compensation or other benefits directly or indirectly from the said issuer company(ies) or any third party in last 12 months in any respect whatsoever for preparation of this report. The research analysts has served as an officer, director or employee of the said issuer company(ies)?: No RSL, its Associates, the research analysts or their relatives holds ownership of 1% or more, in respect of the said issuer company(ies).?: No Copyright: The copyright in this Report belongs exclusively to RSL. This Report shall only be read by those persons to whom it has been delivered. No reprinting, reproduction, copying, distribution of this Report in any manner whatsoever, in whole or in part, is permitted without the prior express written consent of RSL. RSL s activities were neither suspended nor have defaulted with any stock exchange with whom RSL is registered. Further, there does not exist any material adverse order/judgments/strictures assessed by any regulatory, government or public authority or agency or any law enforcing agency in last three years. Further, there does not exist any material enquiry of whatsoever nature instituted or pending against RSL as on the date of this Report. Important These disclaimers, risks and other disclosures must be read in conjunction with the information / opinions / views of which they form part of. RSL CIN: U65990MH2005PLC SEBI registration no. (Stock Broker: INZ , Depository Participants: CDSL IN-DP IN-DP-NSDL , Research Analyst: INH ); AMFI ARN No