All segments in green in August!

MotoGaze September 217 Sector View Overweight Volume performance for August 217 Company Gr. YoY Hero Motocorp 1.1 Bajaj Auto 3. TVS Motors 15.5 Maruti Suzuki 23.8 Tata Motors 13.8 Ashok Leyland 25.1 Mahindra and Mahindra 3.8 Key players & industry volume growth August 17 Industry HMCL BAL TVS HMSI Maruti -1. TML M&M Hyundai ALL.9 1. 13.6 8.9 1.1 8.9 3. 15.5 17.4 6. 3.8 8.3.3 14.3 13.6 13.8 Key players & industry volume growth FY18 Industry HMCL BAL -7.2 TVS HMSI Maruti TML-2.4 M&M -.8 Hyundai -2.2 ALL Research Analyst 2.9 9. Nishit Zota nishit.zota@icicisecurities.com 9.4 Vidrum Mehta vidrum.mehta@icicisecurities.com 12.4 17.1 23.8 21.7 26.4 25.1 MoM YoY YTDFY18 All segments in green in August! September 22, 217 The OEMs reported robust volume growth of 13.6% YoY & 1% MoM in the month of August 217, as all the sub-segments reported positive growth. The overall growth was supported by 1) strong inventory build up across dealer network (ahead of festive season), thereby driving the wholesale volumes; 2) positive rural sentiment backed by decent monsoon spread across India; & 3) after the sector gradually adopted the GST thereby managing the inventory & other adjustments. For August 217, the 2-W volumes grew by 15.2% YoY, supported by both scooter & motorcycle segments. The top two players HMCL & HMSI reported strong volume growth of 1.1% YoY & 26.4% YoY respectively. The PV volumes grew by 5.1% YoY, mainly driven by Utility Vehicle (UV) space. The market leader MSIL continued to outpace the industry, registering stupendous volume growth of 23.8% YoY. The PV segment witnessed some pre-buying in August 217, ahead of the expected increases in cess. (GST council has hiked the cess & was effective from September 11, 217). The CV segment grew by 14.9% YoY, as M&HCV volumes continued to recover, up 21.6% YoY. The 3-W volumes grew 7.8% YoY, as exports were up 17.7% YoY & domestic volumes recovered up 2.5% YoY. The domestic tractor volumes grew 34.5% YoY, on the back of higher expectation of agriculture output & positive consumer sentiments during festive season. MSIL outweighs PV industry Dzire shines at Numero Uno MSIL was a standout in August 217 as its volume grew by 23.8% YoY vs. the PV industry which grew by 5.1% YoY. Its seven models continue to feature in the list of top 1 selling PV in India. Dzire volumes stood at 26,14 units (against average monthly run-rate of ~1,77 units since its launch, mainly due to production ramp-up to reduce its waiting period) and claimed the 1 st position in the top selling PV replacing Alto (volumes at 21,521 units). Volumes of Baleno & Brezza stood at 17,19 units & 14,396 units thereby claiming the third & fourth position respectively. Within the 2-W space, HMSI reported robust volume growth up 26.4% YoY. The growth was supported by Activa & CB Shine whose volumes stood at 335,595 units & 94,748 units thereby enjoying the first & fourth position respectively in the top 1 2-W models sold in August 217. Near term hiccups fading away; long term story intact Overall auto volumes grew 11.1% YoY in 7MFY17 against subdued volume CAGR of 4% in FY12-16. However, demonetisation had a shortterm negative impact due to deferral of vehicle purchase, thereby impacting FY17 volumes (up 5.1% YoY). Further, with industry passing through key events - BS IV norms & implementation of GST in Q1FY18, we believe the demand scenario is likely to improve from here on. Thus, we believe long term growth expectation of the sector remains intact backed by positive consumer sentiment, emission norms (BS VI by 22) & fleet modernisation policy. Further decent monsoon spread across India, is positive for the rural economy thereby boosting auto demand (especially 2-W & tractor segment). Further, Q2FY18E is likely to witness a demand revival mainly due to replenishment of inventory at the dealer level and the onset of the pre-festive period. Thus, we expect industry volumes to grow ~9%, with 2W, PV & CV segment likely to grow in the range of ~9%, 8-9% & 5-6% YoY, respectively, in FY18E. For August 217, the BSE Auto Index was down 2.7% underperforming the benchmark index, which was down 1.8%. In our I-direct auto coverage, we remain bullish on frontline OEM stocks like Maruti Suzuki & Eicher Motors. However, with the favourable impact of operating leverage due to increased demand, the earnings growth trajectory for ancillary stocks is likely to remain on the uptrend.

Overall 2-W segment volumes grew 15.2% YoY in August 217. HMSI reported robust volume growth of 26.4% YoY thereby gaining market share (up 26 bps YoY) to 3.4% Two wheeler volumes post strong growth! For August 217, overall 2-W volumes registered strong growth of 15.2% YoY. The growth was supported by both scooter (volumes up 19.4% YoY) and motorcycle (volume up 13.6% YoY, showing good recovery). The moped segment grew by 7.8% YoY. Overall 2-W domestic volumes grew 14.7% YoY while exports grew 19.8% YoY. In terms of players, HMCL & HMSI reported good growth of 1.1% YoY & 26.4% YoY, respectively. BAL continued to disappointment, with its overall 2-W volumes remained flat (up 1.4% YoY). The 3-W volumes grew 7.8% YoY, as exports were up 17.7% YoY & domestic volumes recovered up 2.5% YoY. The domestic tractor volumes grew by 34.5% YoY to 4,765, on the back higher agriculture output & positive consumer sentiments during festive season. Market share movement According to data released by the Society of Indian Automobile Manufacturers (Siam), the domestic market share of two and threewheeler players as of August 217 is mentioned below. Exhibit 1: Domestic market share movement in two-wheelers 4 35 3 36.88 36.85 36.43 Jul-17 27.83 3.27 3.43 25 2 15 1 11.71 9. 9.1 13.79 13.6 13.75 9.79 1.29 1.37 5 Bajaj Auto Hero MotoCorp TVS Motors HMSI Others, Data used is YTD Exhibit 2: Domestic market share movement in three-wheelers In August 217, domestic 3W volumes grew 2.5% YoY, mainly supported by market leader Bajaj Auto which reported volume growth of 13.3% YoY. Piaggio & M&M domestic volumes declined by 9.8% YoY & 17% YoY respectively. Others M&M Piaggio Bajaj Auto Jul-17 1.1 9.9 9.8 9. 9.5 9.1 28.8 3. 28.4 52.1 5.6 52.7 1 2 3 4 5 6, Data used is YTD Page 2

Overall motorcycle volumes showed recovery (up 13.6% YoY) in August 217. HMCL continues to be the market leader in the space with share of ~52%. HMSI s motorcycle volumes for the month of August 217 grew by 47.7% YoY (supported by CB Shine), thereby resulting in a gain of market share by 23 bps YoY to 16.5% Exhibit 3: Domestic market share movement in motorcycles 7 Jul-17 6 5.7 52.3 52.1 5 4 3 2 18.5 14.4 14.6 16.4 16.5 14.2 1 7.6 7.3 7.3 Bajaj Auto Hero Motocorp TVS motor Honda Source: Company, ICICIdirect.com Research Domestic scooter volumes grew 18.6% YoY in August 217. HMSI s scooter segment grew 17.2% YoY marginally underperforming industry. TVS scooter segment reported strong growth of 49.3% YoY, thereby gaining market share by 23 bps YoY to 15.5% Exhibit 4: Domestic market share movement in scooters/scooters 7 Jul-17 6 59. 59.4 59.2 5 4 3 2 14.9 12.5 12.3 15.3 15.5 13.2 12.9 12.8 13. 1 Hero Motocorp TVS Motors Honda Others, Data used is YTD Page 3

28 332 38 238 23 212 245 244 294 277 25 265 284 ('s) 22 3 4 32 29 28 43 45 36 37 51 48 45 295 532 583 572 424 448 459 537 53 561 547 554 599 ('s) ('s) Hero MotoCorp: Sales volumes 7 6 5 4 3 2 1 84 92 92 56 35 39 73 73 77 8 65 65 69 1 9 8 7 6 5 4 3 2 1 Hero MotoCorp (HERHON) The market leader in the 2-W space, Hero MotoCorp s (HMCL), volumes grew 1.1% YoY to 678,797 units, thereby reporting highest ever monthly sales. Its motorcycle volumes grew 12.6% YoY; while scooter volumes declined 5.4% YoY The highest selling motorcycle Splendor s volume grew 6% YoY. Volume of HF Deluxe & Passion grew 25.5% YoY & 19.8% YoY, respectively. Its scooter volumes were impacted, after growth in volumes of Maestro (up 16.6% YoY) was offset by volume degrowth in Duet & Pleasure 3.2% YoY & 12.2% YoY, respectively. Its export volumes grew 4.4% YoY to 17,37 units. Motorcycles Scooters HMCL reported >6 lakh volumes for the fourth consecutive month. In FY18E, the company has lined up six new launches, including the premium and scooter categories Exhibit 7: Volume performance (in units) Segment %chg Jul-17 %chg YTDFY'18 YTDFY17 %chg Motorcycles 599,211 532,254 12.6 554,145 8.1 2,791,582 2,515,86 11. Scooters 79,586 84,17-5.4 69,124 15.1 364,171 378,12-3.7 Total Sales 678,797 616,424 1.1 623,269 8.9 3,155,753 2,893,926 9. Export(inc. above) 17,37 12,328 4.4 11,962 44.7 71,612 62,827 14. Exports (% of sales) 2.5 2. 55 bps 1.9 63 bps 2.3 2.2 1 bps Source: Company, Siam Bajaj Auto: Sales volumes 45 4 35 3 25 47 44 43 42 2 38 38 15 1 33 5 32 48 46 45 5 48 46 44 42 39 4 4 38 36 34 32 3 Bajaj Auto (BAAUTO) Bajaj Auto s (BAL) 2-W volumes grew marginally up 1.4% YoY, as domestic volumes declined 1.7% YoY while exports volumes grew 6.7% YoY. The domestic volume on YTDFY18 basis, declined by 15% YoY resulting into significant loss of market share (down 27 bps YoY) in 2-W space to 9%. For August 217, Pulsar volumes grew 13% YoY to 82,799 units. Volumes of its entry level segment (>75 cc to 11 cc), which includes brands like CT, Platina, Boxer & Discover grew by 22.7% YoY to 144,673 units mainly backed by strong exports growth in Boxer & Discover. Volume of V15 declined 67% YoY to 6,531 units. The new Dominar clocked volumes of 4,12 units Its 3-W volumes grew 12.6% YoY, as domestic & exports volumes grew by 13.3% YoY & 11.8% YoY respectively. Two-Wheelers Three-Wheelers % exports BAL remains cautiously optimistic and expects volumes to recover going forward. According to the management, everything will fall in place in the domestic market from September 217 onwards (expect domestic motorcycle volume to be >2, units) which will help BAL to gain market share Exhibit 8: Volume performance (in units) Segment %chg Jul-17 %chg YTDFY'18 YTDFY17 %chg Total 2-wheeler sales 283,861 279,911 1.4 265,182 7. 1,324,757 1,437,978-7.9 2W exports 112,197 15,192 6.7 1,267 11.9 561,616 54,55 4. 2W domestic sales 171,664 174,719-1.7 164,915 4.1 763,141 897,923-15. Total 3-wheeler sales 51,17 45,436 12.6 42,545 2.3 26,435 211,23-2.3 3W exports 22,175 19,841 11.8 2,963 5.8 13,511 86,76 19.4 3w domestic sales 28,995 25,595 13.3 21,582 34.3 12,924 124,497-17.3 Total Sales 335,31 325,347 3. 37,727 8.9 1,531,192 1,649,181-7.2 Total Domestic Sales 2,659 2,314.2 186,497 7.6 866,65 1,22,42-15.3 Total Exports 134,372 125,33 7.5 121,23 1.8 665,127 626,761 6.1 Exports as % of sales 4.1 38.4 168 bps 39.4 71 bps 43.4 38. 543 bps Source: Company, Siam Page 5

13 184 167 96 53 139 12 85 183 176 145 168 192 152 23 229 25 254 ('s) 336 356 33 369 334 271 344 394 114 123 122 68 58 6 58 96 1 118 112 19 112 56 71 69 73 ('s) 84 81 77 85 92 66 72 78 86 9 92 114 78 71 6 77 8 9 72 66 62 83 TVS Motors: Sales volumes 325 275 225 175 125 75 25 Motorcycles Scooters Mopeds TVS Motors (TVSMOT) TVS volumes (2-W+3-W) for August 217 came in at ~3.2 lakh units, up 15.8% YoY. The 2-W volumes grew 15.5% YoY while 3- W volumes grew 26.9% YoY Motorcycle segment volumes declined 2% YoY to 111,927 units. Volumes of Apache declined 8.9% YoY to 4,198 units. Volumes of Starcity (family) & Sport grew 25.3% YoY to 31,545 units & 9.8% YoY to 23,38 units, respectively. Its scooter volumes grew 49.3% YoY to 114,354 units. Overall volumes of Pep+ grew 33.8% YoY to 15,548 units, Jupiter (up 57.2% YoY to 81,39 units), Wego (up 39.9% YoY to 9,444 units) & Zest (up 24.4% YoY to 8,53 units). Its moped (new TVS XL 1) volumes grew by 7.8% YoY at 82,865 units. Export (14.8% of sales) volumes grew 33.7% YoY to 45,64 units as 2-W volumes grew 34.6% YoY to 38,62 units Exhibit 9: Volume performance (in units) Segment %chg Jul-17 %chg YTDFY'18 YTDFY17 %chg Motorcycles 111,927 114,195-2. 19,427 2.3 551,44 491,672 12.1 Scooters 114,354 76,572 49.3 92,378 23.8 464,34 34,919 36.2 Mopeds 82,865 76,93 7.8 61,531 34.7 341,845 375,722-9. Total 2-W Sales 39,146 267,67 15.5 263,336 17.4 1,357,553 1,28,313 12.4 3-Wheelers 8,417 6,633 26.9 7,835 7.4 33,289 31,93 4.3 Total Sales 317,563 274,33 15.8 271,171 17.1 1,39,842 1,24,243 12.1 Exports(incl. in above) 45,64 34,97 33.7 5,957-1.5 217,619 177,274 22.8 Exports as % of sales 14.8 12.7 19.4 16. 14.7 Domestice sales 271,959 24,26 13.2 22,214 23.5 1,173,223 1,62,969 1.4 Source: Company, Siam HMSI: Motorcycles & scooter sales volumes 675 6 525 45 375 3 225 15 75 Honda Motorcycles & Scooters India (HMSI) For August 217, HMSI s volumes grew 26.4% YoY to 622,244 units. This was after domestic motorcycle & scooter grew 47.7% YoY & 17.2% YoY, respectively The growth in domestic motorcycles can mainly be attributed to good volume growth of CB Shine, up 49% YoY to 94,748 units. Apart from that, volumes of CB Unicorn grew 54.7% YoY to 2,944 units. Domestic scooter volumes grew 17.2% YoY, supported by volumes of Activa up 19.5% YoY to 335,595 units & volumes of Dio that grew 12.6% YoY to 39,964 units. HMSI s Navi has received a poor response, as its volumes continue to shrink to 2,546 units in August 217 vs. 9,78 units in August 216. Its newly launched CLIQ volumes were at 7,654 units in August 217 Motorcycles Scooters Export volumes grew 38.1% YoY to 36,7 units, led by strong growth in the motorcycle & scooter space, up 27.6% YoY to 16,854 units & 48.8% YoY to 19,153 units. Strong growth in the export market increased its overall share by 49 bps YoY to 5.8% Exhibit 1: Volume performance (in units) Segment %chg Jul-17 %chg YTDFY'18 YTDFY17 %chg Motorcycles 191,949 129,926 47.7 12,381 59.5 864,777 699,36 23.7 Scooters 394,288 336,363 17.2 39,17 27.5 1,711,898 1,451,436 17.9 Total Sales 622,244 492,368 26.4 453,844 37.1 2,727,113 2,24,867 21.7 Exports(incl.above) 36,7 26,79 38.1 24,333 48. 15,438 17,151 4.4 Exports as % of sales 5.8 5.3 49 bps 5.4 43 bps 5.5 4.8 73 bps Domestice sales 586,237 466,289 25.7 429,511 36.5 2,576,675 2,133,756 2.8 Source: Company, Siam Page 6

MSIL dominates PV segment The overall passenger vehicles segment for August 217 grew 5.1% YoY to 351,89 units. This was due to OEMs inventory push at the dealer s end ahead of festive season and the PV segment witnessing some pre-buying ahead of the expected increases in cess. The domestic PV volumes increased 13.8% YoY to 294,335 units, however exports volumes declined 24.7% YoY to 56,754 units. Within the sub-segment, utility vehicle (UVs) volumes grew 8% YoY to 9,37 units, passenger car volumes were up 3.8% YoY to 244,18 units while van volumes grew 8.9% YoY to 16,944 units. The market leader of PV space, MSIL continued to outperform the industry, with volumes up 23.8% YoY to 163,71 units. For August 217, utility vehicle (UV) volumes increased 8% YoY to 9,37 units. The UV1 sub-segment grew 6.8% YoY to 64,576 units, driven by Maruti Suzuki s Vitara Brezza, which has done exceptionally well in a short period, since its launch in March 216, to climb to first position as the highest selling UV model in India. For August 217, Vitara Brezza volumes grew 48.9% YoY to 14,396 units while Honda Cars WR-V clocked volume of 5,26 units. Hyundai s Creta volume grew 2.8% YoY to 14,598 units. M&M s TUV3OO, which was launched in September 215, has not helped the company to capitalise on the UV1 space. Ford Ecosport volumes declined 22.7% YoY to 1,264 units. Volumes in the UV2 space declined 18.1% YoY to 17,35 units as 1) Toyota s Innova volume declined 27.5% YoY to 5,964 units and 2) Honda Cars BR-V, (which has received modest consumer response since its launch in May 216) volumes declined 44.5% YoY to 1,436 units. The commercial vehicle volume revived; up 14.9% YoY to 72,62 units, as M&HCV volumes recovered up 21.6% YoY to 29,575 units. LCV volumes continued with its decent growth, up 1.7% YoY to 43,27 units. The MHCV/LCV volume ratio was at 28:72 in April 217 vs. the average ratio 4:6 over the past 36 months. However, it has normalized to 41:59 in August 217, as M&HCV volumes gradually recovered. Market share movement According to Siam, the domestic market share for passenger vehicles (PV) and commercial vehicles (CV) in August 217 was as follows: Exhibit 11: Domestic market share movement in passenger vehicles MSIL continues to dominate the PV segment. With continued strong volume growth (outpacing the industry growth) its market share is now at 5.9% in August 217 Others Honda Cars M&M Tata Motors Hyundai Maruti 14.6 Jul-17 14.6 17.9 5.5 5.4 4.9 7.3 7.5 7.8 5.5 5.5 5.5 16.2 16.3 17.1 5.9 5.7 46.7 1 2 3 4 5 6, Data used is YTD * passenger vehicles as per Siam include Vans like Gio, Maxximo, Eeco, Ace Page 7

Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Exhibit 12: Market share movement in A2 segment The A2 segment is the bread & butter category of the passenger car segment. The segment has witnessed some sharp demand revival (as on a YTDFY18 basis - volumes are up 11.4% YoY), primarily supported by the market leader MSIL. 8 7 6 5 4 3 2 1 7.1 62. 3.3 23.3 Hyundai Maruti, Top two PV OEMs considered The M&HCV & LCV volumes increased 21.6% YoY & 1.7% YoY, respectively, in August 217. Thus, overall CV volumes grew 14.9% YoY M&HCV volumes has recovered in the recent past, thus benefiting players like Tata Motors & Ashok Leyland, which has seen improvement in their overall market share While M&M s product portfolio has been more tilted towards LCV segment, it has witnessed a drop in market share on a MoM basis in August 217 Exhibit 13: Domestic market share movement in commercial vehicles Jul-17 5 45 43.1 41. 42. 4 35 29.2 3 28.2 24.6 25 2 17.7 17. 17.3 14.7 15 12.9 12.5 1 5 ALL M&M Tata Motors Others Data used is YTD The MHCV/LCV ratio was at 41:59 in August 217 vs. 28:72 in April 217, after M&HCV volumes sharply recovered over the last three months. Average M&HCV volumes (over the past 36 months) has been ~4% of total CV sales Exhibit 14: Segmental share in CVs 8 7 6 57.4 59.3 5 42.6 4.7 4 3 2 1 M&HCV LCV Page 8

132 ('s) 149 134 136 118 144 13 14 151 137 16 165 164 Aug'16 Sept'16 Oct'16 Nov'16 Dec'16 Jan'17 Feb'17 Mar'17 Apr'17 May'17 June'17 July'17 Aug'17 (% share of total volumes) 42.3 41.9 47.4 52.9 51.8 53.1 48.7 54.6 47.1 49.4 51.4 44.4 ('s) 71.6 29.2 33.7 25.8 18. 36.1 29.8 33.2 33.4 27.4 29.1 31.1 41.4 34.6 12.9 ('s) 13.8 13.1 11.1 1.9 11.3 15. 16.8 13.2 14.1 15.1 14.4 15.7 Tata Motors: Domestic sales volume 7 6 5 4 3 2 1 Maruti Suzuki India: Sales volumes 18 16 14 12 1 8 6 4 2 9.3 CV Sales Source: Company, ICICIdirect.com Research Jaguar Land Rover sales volume 1 8 6 4 2 PV Sales % Jaguar % LR JLR total volumes(rhs) Source: Company, ICICIdirect.com Research Total Sales Export % 14 12 1 8 7.1 6 4 2 8 7 6 5 4 3 2 1 Tata Motors (TATMOT) Tata Motors overall standalone volumes increased 13.8% YoY to 48,988 units, backed by strong performance of its domestic CV & UV segment which grew by 34.5% YoY & 83.7% YoY Domestic M&HCV volumes increased 38.7% YoY to 13,823 units while LCV volumes grew 31.5% YoY to 17,743 units. Domestic car volumes remained flat - up marginally.2% YoY to 11,462 units. Overall volumes of Tiago & Tigor were at 7,37 units & 2,127 units, respectively. Volumes of Hexa (launched in January 217) came in 1,716 units in August 217 JLR s wholesale volumes grew 5.1% YoY at 44,42 units. Jaguar volumes declined 15.8% YoY to 1,978 units. Land Rover volumes grew 14.4% YoY to 33,442 units. We believe the China market must have witnessed good volume growth while other regions must have shown negative volume growth for August 217. Exhibit 15: Volume performance (in units) Segment %chg Jul-17 %chg YTDFY'18 YTDFY17 %chg Domestic MHCV 13,823 9,969 38.7 11,344 21.9 47,73 55,768-14.5 Domestic LCV 17,743 13,495 31.5 16,498 7.5 77,6 7,23 9.6 Domestic Pass.Car Sa 11,462 11,435.2 12,125-5.5 54,586 52,242 4.5 Domestic UV 2,878 1,567 83.7 2,88 2.5 9,545 5,928 61. Exports 3,82 6,595-53.3 3,441-1.4 16,55 25,782-37.7 Total Sales 48,988 43,61 13.8 46,216 6. 24,895 29,95-2.4 Jaguar 1,978 13,38-15.8 14,452-24. 63,153 61,979 1.9 Landrover 33,442 29,222 14.4 36,973-9.6 171,168 158,547 8. Total JLR Sales 44,42 42,26 5.1 51,425-13.6 234,321 22,526 6.3 Source: Company, Siam Maruti Suzuki India (MARUTI) Maruti Suzuki (MSIL) volumes grew by 23.8% YoY to 163,71 units in August 217. Its domestic mini car segment declined by.2% YoY, as growth in domestic volumes of Alto (up 2.9% YoY) was offset by de-growth in volumes of Wagon R (down 4.6% YoY). Domestic volumes of Baleno, Vitara Brezza were at 17,19 units, 14,396 units, respectively. Dzire volumes stood at 26,14 units vs. average monthly run-rate of ~1,77 units since its launch, mainly due to production ramp-up to reduce its waiting period. Exports volumes declined 4.7% YoY to 11,71 units. MSIL aims to grow at double digits over the next 3-5 years thereby achieving its target of selling 2 mn vehicles by 22. The company will also launch Electric car models based on customer preference. Exhibit 16: Volume performance (in units) Segment %chg Jul-17 %chg YTDFY'18 YTDFY17 %chg Omni, Eeco,Versa 13,931 12,831 8.6 15,714-11.3 65,384 64,137 1.9 Alto, Wagon-R, Zen, Swift,Ritz, Celerio, Dzire,Baleno 19,44 81,69 35. 15,426 3.8 473,69 391,43 21. SX4, Swift Dzire Tour, Ciaz 6,457 9,2-29.8 6,377 1.3 28,532 38,97-26.7 Total Passengers 129,828 13,1 25.9 127,517 1.8 567,66 494,474 14.8 Gypsy, Vitara,Ertiga,Brezza 21,442 16,86 27.6 25,781-16.8 14,348 73,536 41.9 Total Domestic 151,27 119,96 26.2 153,298-1.3 671,954 568,1 18.3 LCV (Super Carry) 73 25 NA 73 NA 2,478 39 NA Exports 11,71 12,28 (4.7) 11,345 3.1 49,186 49,721-1.1 Total Sales 163,71 132,211 23.8 165,346-1. 723,618 617,77 17.1 Exports as % of sales 7.1 9.3 6.9 6.8 8. Source: Company, Siam. Page 9

Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 13.5 14. ('s) 17.3 15.9 15. 19.3 18.8 16.5 26. 25.6 3.6 32.9 45.2 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 ('s) 32.5 36.4 4.6 39.3 46.1 42.7 39.4 35.7 41.9 41.7 42.1 52. 56. Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 4.5 8.2 6.9 6.1 9. 9.6 8.8 12.1 11.3 9.2 9. 2.6 1.6 ('s) 2.6 15.3 2.9 2.7 3.1 1.9 3. 3.1 3. 2.8 2.7 3. 3.4 Ashok Leyland: Total sales Ashok Leyland (ASHLEY) 2 18 16 14 12 1 8 6 4 2 M&HCV LCV Ashok Leyland s (ALL) volumes grew 25.1% YoY to 13,615 units, as M&HCV volumes grew 29% YoY to 1,57 units. LCV volumes grew 12.9% YoY to 3,45 units. Its M&HCV market share has significantly improved up 228 bps YoY to 34.3% YoY. Volumes of M&HCV passenger declined 2.3% YoY to 1,746 units while M&HCV goods volumes grew 47.1% YoY to 8,824 units. Exports grew 57% YoY, with overall share at 12.3% of sales. ALL is aiming to diversify its business with focus on 1) LCV aiming to launch one product per quarter; 2) Exports plans to increase export revenue to >3% from the current of <1%; 3) Aftermarket aims to increase higher margin aftermarket business; 4) Defence aims to increase its revenue by 1x (from the current revenue of ~ 5 crore to 5, crore going forward) Exhibit 17: Volume performance (in units) Segment %chg Jul-17 %chg YTDFY'18 YTDFY17 %chg M&HCV Passenger 1,746 2,192-2.3 1,79 2.2 8,24 9,675-14.8 M&HCV Goods 8,824 5,999 47.1 7,317 2.6 31,236 3,721 1.7 LCV 3,45 2,696 12.9 2,955 3. 14,618 12,148 2.3 Passenger Vehicles - NA NA - - NA Total Sales 13,615 1,887 25.1 11,981 13.6 54,94 52,544 2.9 Exports 1,678 1,69 57. 1,457 15.2 6,412 4,518 41.9 Exports as % of sales 12.3 9.8 12.2 11.9 8.6 Source: Company, Siam Mahindra and Mahindra: Sales volume Mahindra and Mahindra (MAHMAH) 7 6 5 4 3 M&M s overall automotive volumes grew 3.8% YoY to 42,116 units. Its core UV segment (including exports) increased 6.6% YoY to 18,255 units. Volumes of Bolero grew 4.6% YoY to 5567 units. Volumes of XUV5OO grew 25.4% YoY to 3113 units while Scorpio volumes grew marginally up 2.1% YoY to 4,462 units. Volumes of TUV3OO remained flat (up.5% YoY to 2,34 units) while that of KUV1OO declined by 6.1% YoY to 1,119 units. 2 1 Source: SIAM, ICICIdirect.com Research Mahindra and Mahindra: Tractor sales 5 45 4 35 3 25 2 15 1 5 M&M s tractor volumes grew 22% YoY to 16,516 units. The domestic tractor industry volumes increased by 34.5% YoY to 4,765 units in August 217, up 12.8% YoY (261,843 units) for YTDFY18. The higher expectation of agriculture output & positive consumer sentiments during festive season is likely to improve overall tractor demand, going forward Exhibit 18: Volume performance (in units) Segment %chg Jul-17 %chg YTDFY'18 YTDFY17 %chg UV s 18,255 17,119 6.6 19,152-4.7 9,489 88,99 1.7 4-Wheeler pickups 15,346 13,993 9.7 13,761 11.5 72,116 64,387 12. M & HCV 957 1,127-15.1 1,262-24.2 5,662 5,728-1.2 Total 4wheeler Sales 35,628 32,239 1.5 35,985-1. 173,85 162,657 6.9 3-Wheeler 3,96 4,75-17. 3,777 3.4 17,738 21,491-17.5 Total Domestic Auto Sales 39,534 36,944 7. 39,762 -.6 191,588 184,148 4. Exports 2,582 3,647-29.2 1,985 3.1 9,243 18,369-49.7 Total Auto Sales 42,116 4,591 3.8 41,747.9 2,831 22,517 -.8 Exports as % of sales 6.1 9. 4.8 4.6 9.1 Tractors - Domestic 15,246 12,327 23.7 17,682-13.8 114,16 1,428 13.6 - Exports 1,27 1,216 4.4 1,15 1.4 5,775 5,263 9.7 Total Tractors 16,516 13,543 22. 18,832-12.3 119,881 15,691 13.4 Exports as % of sales 7.7 9. 6.1 4.8 5. Source: Company, Siam Source: SIAM, ICICIdirect.com Research Page 1

Top domestic model wise volumes for August 217 Exhibit 19: Top 1 passenger vehicle Models sold in India (in units) S.No. Models Models 1 Alto 2,919 DZIRE 26,14 2 DZIRE TOUR 15,766 Alto 21,521 3 Wagon R 14,571 Baleno 17,19 4 Swift 13,27 VITARA BREZZA 14,396 5 Grand i1 12,957 Wagon R 13,97 6 Elite i2 11,11 Swift 12,631 7 Kwid 1,719 Grand i1 12,36 8 VITARA BREZZA 9,554 Elite i2 11,832 9 Baleno 8,671 Creta 1,158 1 Creta 8,45 Celerio 9,21 Exhibit 2: Top 1 two-wheelers Models sold in India (in units) S.No. Models Models 1 Activa 28,79 Activa 335,595 2 Splendor 229,61 Splendor 242,431 3 HF Deluxe 127,752 HF Deluxe 161,177 4 Passion 77,581 CB Shine 94,748 5 TVS XL Super 75,435 Passion 93,3 6 Glamour 74,693 TVS XL Super 81,919 7 CB Shine 63,66 Jupiter 81,277 8 Jupiter 51,728 Glamour 8,16 9 Pulsar 48,91 Pulsar 58,795 1 CT 44,599 CT 57,561 Page 11

U.P. Maharashtra Tamil Nadu Andhra Pradesh Gujarat Karnataka Bihar Madh. Prad. Rajasthan West Bengal 47735 415268 41822 417724 338616 3118 314955 2957 312391 39123 27463 227184 255366 225293 25378 22762 24446 237845 768866 565375 Maharashtra U.P. Gujarat Kerala Karnataka Tamil Nadu Delhi Haryana Rajasthan Telangana 6282 5765 61687 55696 5265 46763 52434 5921 51613 5161 49516 49594 39978 41157 3621 32763 26931 26778 83533 87896 State wise sales mix for Q1FY18 (April June 217) State wise market share of PV for Q1FY18 Exhibit 21: Top 1 state wise PV volume for Q1FY18 (in units) Others, 33% Rajasthan, 5% Haryana, 6% Maharasht ra, 11% Delhi, 7% Tamil Nadu, 7% U.P., 9% Gujarat, 8% Kerala, 7% Karnataka, 7% 1 9 8 7 6 5 4 3 2 1 Q1FY18 (units) Q1FY17 (units) YoY growth % 15 1 5-5 -1-15 State wise market share of 2-W for Q1FY18 U.P., 16% Exhibit 22: Top 1 state wise 2-W volume for Q1FY18 (in units) Q1FY18 (units) Q1FY17 (units) YoY growth % Others, 32% Rajasthan, 5% Madh. Prad., Bihar, 6% 5% Karnataka, 6% Gujarat, 7% Maharashtra, 8% Andhra Pradesh, 7% Tamil Nadu, 8% 9 8 7 6 5 4 3 2 1 4 35 3 25 2 15 1 5-5 -1 Page 12

Gujarat Maharashtra Karnataka Andhra Pradesh Telangana U.P. Kerala Bihar Tamil Nadu Madh. Prad. 11632 11718 1782 8974 1692 8911 15398 7429 8648 7399 129 6936 75 6441 7468 6354 569 3943 3797 27632 Maharashtra U.P. Tamil Nadu Rajasthan Karnataka Andhra Pradesh Gujarat Haryana West Bengal Assam 13711 13457 12341 15372 1142 1243 167 11562 972 11896 8946 1182 877 9739 7792 943 575 5469 18111 2195 State wise sales mix for Q1FY18 (April June 217) State wise market share of CV for Q1FY18 Exhibit 23: Top 1 state wise CV volume for Q1FY18 (in units) Others, 34% Maharashtra, 12% U.P., 9% Tamil Nadu, 8% 25 2 Q1FY18 (units) Q1FY17 (units) YoY growth % 1 5 West Bengal, 5% Haryana, 6% Gujarat, 6% Andhra Pradesh, 6% Rajasthan, 7% Karnataka, 7% 15 1 5-5 -1-15 -2-25 -3 State wise market share of 3-W for Q1FY18 Exhibit 24: Top 1 state wise 3-W volume for Q1FY18 (in units) Others, 29% Tamil Nadu, 6% Bihar, 6% Kerala, 7% U.P., 7% Gujarat, 11% Maharashtra, 1% Karnataka, 9% Andhra Pradesh, 8% Telangana, 7% 3 25 2 15 1 5 Q1FY18 (units) Q1FY17 (units) YoY growth % 2 1-1 -2-3 -4-5 -6-7 Page 13

News & views The GST Council decided to hike the cess on mid-sized cars by 2%, taking the effective GST rate to 45%. Also, the cess on large cars has been hiked by 5%, taking the total GST incidence to 48% and that of SUVs by 7% to 5%. The increase in cess will be effective from September 11, 217. We believe the quantum of increase in cess was below street estimate of ~1%. Further, the increase in cess will be largely passed on to consumers. Suzuki Motor Corp has announced fresh investments of around ~3,8 crore in Gujarat to add a third car production plant (capacity of 25, units). The company along with its partners Toshiba & Denso is likely to invest ~ 1,15 crore for a new unit to produce lithium ion batteries. We believe both the above development by Maruti Suzuki (MSIL) parent (Suzuki) is likely to benefit MSIL in long term. Mahindra & Mahindra Ltd (M&M) has acquired second company in Turkey named Erkunt Traktor Sanayii A.S. (Erkunt) which was incorporated in 23, and is the 4th largest tractor brand in Turkey with a market share of ~6%. M&M will acquire 1% stake in Erkunt Traktor Sanayii A.S for 478 crore and at least 8% of Erkunt Sanayi A.s, which is its foundry business. Erkunt is a key player in the Turkish tractor industry with a wide product portfolio from 55HP to 11 HP suitable for diverse farming needs. For CY16 its revenue stood at $88 million (~ 572 crore) and sold ~ 4,7 tractors during that period. In another development, M&M has unveiled driverless tractors, which it will commercially launch in 218. The company plans to offer this product across segments of 2 HP to 1 HP. We believe this product will not only strengthen its leadership position domestically, but also increase the contribution of exports in overall revenue. Tata Sons acquired 1.7% stake in Tata Motors at 421.6/share taking the overall consideration to 2, crore. In another development, TML is strengthening its position in the UV space, and has launched Tata Nexon on September 21, 217 which is likely to drive its volume and gain market share going forward. Further it is planning to launch two new SUVs (5-seater and 7- seater) on Land Rover platform in FY19E, which is likely to compete against Hyundai s Creta & Jeep Compass. Page 14

RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Sector view: Over weight compared to index Equal weight compared to index Under weight compared to index Index here refers to BSE 5 Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai 4 93 research@icicidirect.com Page 15

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