motogaze - icici february 2013

7/29/2019 MotoGaze - ICICI February 2013

1/18CICI Securities Ltd.|Retail Equity Research

February 18, 2013otoGaze - February, 2013

Macro headwinds seen easing

Overall industry posts sluggish numbers

Overall auto sales for January have grown 4.1% YoY at 1.79 million units.

The two-wheeler segment has witnessed better growth (7.6% YoY)compared to the rest of the year. Motorcycle volumes in the domestic

market have done well in January with ~8.5% YoY growth. Scooter

segment growth also picked up with ~12% YoY in domestic markets.

Passenger vehicles witnessed de-growth of ~6% YoY dragged by the

~12.5% decline in the passenger car segment. The UV segment (~40%

YoY) continued to exhibit handsome growth in a gloomy demand

scenario. Demand in the M&HCV segment continued to remain sluggish

over the past few months and January was no exception (~40% YoY

decline). However, we believe demand in this segment may have finally

bottomed out and only short-term pain persists for the segment. With

RBIs stance on policy rate softening with declining inflation data, we

expect the segment to recover and post higher volumes. The LCV

segment has also witnessed a slowdown (~5% YoY growth) in January as

slowdown in industrial activity has finally caught up and hike in diesel

prices has slowed demand.

Siam revises forecastyet again!!!

In the wake of the sluggish demand scenario for the industry, Siam had

cut its forecast for FY13E. This time, Siam has indicated that the

passenger car segment will be unable to meet its guidance, which was

revised last month to 0-1% and will slip in the negative growth territory for

the first time in 10 years. However, we believe with the softening of RBIs

stance on policy rate, FY14E will witness a spurt in demand.RBI cuts policy rate as inflation eases

Sticky interest rates and high fuel prices had dented demand for the two-

wheeler and PV segment. However, with inflation rates easing and growth

rate on a declining trajectory, the RBI has begun easing interest rates and

the outlook on the policy rate has also become dovish. This augurs well

for the automobile segment growth. Going ahead, as economic activity

improves, the segment may see healthy growth rates again. Newer

product launches by OEMs is the only way to ensure volume growth as

model fatigue creeps in sooner than was the case in previous years.

Industry outlook

Our volume growth outlook for the industry is mildly positive with growth

ranging at 9-10% for FY14E. Volumes are likely to witness an increase in

the passenger car segment as the segment will witness a host of newlaunches in FY14E. In the two-wheeler segment, we expect a mild

slowdown in the scooter segment after the rapid growth witnessed in the

past two years. In the three-wheeler space, goods carriers are likely to

remain under pressure as the onslaught from LCVs continues, which will

continue to drive growth in the CV segment. However, passenger carriers

are likely to witness growth as new licenses open up in major Indian cities.

On the basis of index performance, the BSE Auto index (one-month return

-3.8%) has underperformed the BSE Sensex (one-month return 2.4%) in

January.

Among our I-direct auto-coverage, we remain bullish on frontline OEM

stocks like Tata Motors and Maruti Suzuki. In the ancillary coverage, wefind favourable valuation and business growth perspective in Apollo Tyres

and Bharat Forge.

ctor View

rweight

ume performance

mpany Gr. YoY(%)

o Motocorp 7.2%aj Auto 2.9%

Motors -1.2%

ruti Suzuki -1.1%

a Motors -29.5%

hindra and Mahindra 10.7%

ok Leyland 2.6%

y players & industry volume growth -Oct12(%)

9.5

10.7

2.6

2.9

7.2

-1.2

21.6

-1.1

4.3

4.2

44.8

4.5

3.0

1.1

9.8

5.8

20.0

-6.0

9.3

8.8

Industry

HMCL

BAL

TVS

HMSI

Maruti

Hyundai

TML

M&M

ALL

YoY gr

MoM gr

rce: Siam

y players & industry volume growth YTD (%)

3.6

-8.3

-5.3

19.1

-1.5

6.0

35.3

17.5

3.3

-1.8

Industry

HMCL

BAL

TVS

HMSI

Maruti

TML

M&M

Hyundai

ALL

rce: Siam

alysts name

shant [email protected] [email protected]

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2/18ICICI Securities Ltd.|Retail Equity Research

Page 2

News & views

Honda India launched the fourth generation of its popular sportsutility vehicle (SUV), CR-V at an introductory price of | 19.95 lakh

(ex-showroom, New Delhi). Following this successful launch,

Honda has big plans of launching six new products and their

variants in the domestic auto market during this year. The newvehicles would also feature diesel engines, which will be the auto

makers new move in the country

Ford Motors has introduced an all-terrain edition of its flagshipSUV, Endeavour, in the domestic auto market with a price tag of

| 19.1 lakh (ex-showroom, New Delhi)

Tata Motors has introduced its new premium hatchback IndicaVista Quadrajet D90 in the domestic market. The 'D90' suffix stands

for the car's ability to produce 90 PS in output power, which is the

company's most powerful hatchback in the country till date. At

present, the Tata Indica Vista D90 premium hatch competesagainst the likes of Maruti Suzuki Swift, Fiat Grande Punto,

Volkswagen Polo and Hyundai i20 in the domestic auto market.

The company has introduced its new Indica Vista D90 with a price

tag of | 5.99 lakh for VX trim (ex-showrooms, New Delhi)

German carmaker Volkswagen has launched a new variant of itshatchback Polo priced at | 6.27 lakh (ex-showroom New Delhi).

With sales of ~30,000 units YTD, it constitutes ~55% of VWs

sales volume




Page 3

Two & three wheeler industry

The two-wheeler industry has seen low demand in this fiscal year.

However, the segment witnessed some momentum over the past two

months. The motorcycle segment has been the most impacted by the

demand slowdown and has seen ~1% growth YTD. However, demand

has begun to show green shoots of growth with volumes growing ~5% in

December and 7% in January. The scooter segment has begun to show

signs of slowing down from the rapid pace of growth seen early in the

year and grown at ~10% YoY for January. However, as per the reports

from the industry body, there is a large inventory pile-up in the channel for

leader HMCL. Hence, the wholesale numbers for January may be different

from the actual retail volumes for HMCL.

Monthly sales for Hero MotoCorp (HMCL) have increased slightly as

production cuts undertaken for rebalancing inventory at the dealers end

are over. Bajaj Auto (BAL) posted muted growth of 2% YoY as exports

picked up in the new calendar year with ~14% growth. A worrying sign

was de-growth in domestic sales by 3% YoY. HMSI has continued to

outperform the segment with high growth in the motorcycle segment,which grew 55% for January. The scooter segment has, however,

witnessed a decline in volumes by ~1% as increased competitive

pressure from HMCL and low volumes from the export market hurt

volumes. TVS Motors has continued to lose ground in the two wheeler

segment, with motorcycle sales declining 2% YoY and the scooter

segment declining 8% YoY. The moped segment, on the other hand,

witnessed 8% growth.

The three-wheeler industry has grown 4.3% YoY driven primarily by

passenger carriers (~6% growth) while the goods carrier segment has de-

grown ~9% in January. The domestic three-wheeler passenger carrier

segment has been boosted by fresh license issuances in Maharashtra,Delhi and a few other states. In the near future, we expect domestic three-

wheeler manufacturers to increasingly target the export market as the

domestic market looks sluggish. A major challenge for the three-wheeler

passenger segment may emerge from the quadricycle a new market

segment for which norms are likely to be finalised in the coming quarter.

Market share movement

According to data released by the Society of Indian Automobile

Manufacturers (Siam), the domestic market share of two and three-

wheeler players is as below for January 2013.




Page 4

Exhibit 1:Domestic market share movement in two-wheelers

19.4

45.3

14.3 14.3

6.7

18.4

42.6

12.8

18.6

7.5

18.2

42.9

12.8

18.6

7.5

0

5

10

15

20

25

30

35

40

45

50

Bajaj Auto Hero Motocorp TVS motor HMSI Others

(%)

Jan-12 Dec-12 Jan-13

Source: Siam, Data used is YTD

Exhibit 2:Domestic market share movement in three-wheelers

39.3

36.3

13.4

11.1

41.3

34.5

12.5

11.8

42.0

33.9

12.4

11.7

0 5 10 15 20 25 30 35 40 45

Bajaj Auto

Piaggio

M&M

Others

(%)



Exhibit 3:Domestic market share movement in motorcycles

25.7

55.9

6.2 7.4

25.0

52.9

5.5

11.4

24.7

53.2

5.5

11.5

0

10

20

30

40

50

60

Bajaj Auto Hero Motocorp TVS motor Honda

(%)


Source: Company, ICICIdirect.com Research

Hero MotoCorp has been losing market share in the

segment in which it is the market leader. However, in the

last quarter, HMCL has been able to maintain a decent run-

rate as the festive season helped generate demand. HMSI

continues to outperform the industry rate on the back of

high growth in the motorcycle segment

BAL has managed to improve its market share taking away

share from Piaggio. Piaggio is losing share in both the

passenger and goods carrier segment. Smaller players like

Atul Auto have also been steadily improving market share

Hero MotoCorp continues to be the market leader in the

executive and economy segment. High fuel prices and an

overall reduction in discretionary spending have started to

hit this segment. The market seems to be moving in favour

of global OEMs like HMSI, Suzuki and Yamaha that have

shifted focus to the economy segment. However, HMCL

has managed to post decent volumes for January




Page 5

Exhibit 4:Domestic market share movement in scooters/scooterettes

16.3

20.6

46.7

16.418.0

15.2

48.8

18.018.4

15.1

48.3

18.2

-5

5

15

25

35

45

55

Hero Motocorp TVS Motors Honda Others

(%)



Exhibit 5:Market share movement in executive motorcycle segment*

29.1

22.128.9

64.2

70.664.3

6.77.3 6.8

0

10

20

30

40

50

60

70

80

90

Jan-1

1

Fe

b-1

1

Mar-11

Apr-11

May-1

1

Jun-1

1

Ju

l-11

Aug-1

1

Sep-1

1

Oct-11

Nov-1

1

Dec-1

1

Jan-1

2

Fe

b-1

2

Mar-12

Apr-12

May-1

2

Jun-1

2

Ju

l-12

Aug-1

2

Sep-1

2

Oct-12

Nov-1

2

Dec-1

2

Jan-1

3

(%)

Bajaj Auto Hero Motocorp TVS

Source: Siam * only top 3 two-wheeler OEMs Note: From Apr12, executive segment includes 125cc sales

Exhibit 6:Market share movement in greater than 125 cc segment77.4

72.9

68.2

13.2 18.120.0

9.49.0 11.8

0

10

20

30

40

50

60

70

80

90

Jan-11

Feb-11

Mar-11

Apr-11

May-11

Jun-11

Jul-11

Aug-11

Sep-11

Oct-11

Nov-11

Dec-11

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

Jul-12

Aug-12

Sep-12

Oct-12

Nov-12

Dec-12

Jan-13

(%)

Bajaj Auto (LHS) Hero Motocorp (RHS) TVS

Source: Siam *only top three vehicle two-wheeler OEMs

HMSI continues to be the clear leader in the scooter

segment. The scooter segment remains one of the fastest

growing segments in the entire automobile industry.

HMCL has lost some market share in the scooter

segment as competitive intensity along with rationalising

of growth rates has hit this segment

The executive motorcycle segment continues to be

dominated by Hero MotoCorp




Page 6

Hero MotoCorp (HERHON) Hero MotoCorp (HMCL), the market leader in the two-wheeler

segment, has registered MoM increase of ~3% in January. This is

also ~7% increase YoY. HMCL has been able to maintain its

monthly run rate as the scooter segment has grown rapidly, much

higher than the segment growth, albeit on a lower base. The

company registered monthly volume of 557,797 units, its highestever monthly sales volumes

The motorcycle segment has grown 5% for HMCL aided byimprovement in volumes coming from Glamourand Ignitor

The executive segment (125-150 cc) has continued to remainunder pressure and declined ~6% YoY in the absence of new

launches and high fuel prices

The scooter segment for HMCL has generated high growth involumes at ~54,979 units, a rise of ~32% YoY. The demand for

HMCL scooters is likely to remain in an uptrend as the segment

continues to remain one of the fastest growing

Exhibit 7:Volume performance (in units)Segment Jan-13 Jan-12 %chg Dec-12 %chg YTD13 YTD12 %chgMotorcycles 502,818 478,675 5.0 484,042 3.9 4,643,476 4,814,753 -3.6

Scooters 54,979 41,597 32.2 57,573 -4.5 462,553 369,398 25.2

Total Sales 557,797 520,272 7.2 541,615 3.0 5,106,029 5,184,151 -1.5

Exports(inc. above) 9,956 13,846 -28.1 14,240 -30.1 131,815 141,398 -6.8

Exports (% of sales) 1.8 2.7 - 2.6 - 2.6 2.7 -

Source: Company, Siam

Bajaj Auto (BAAUTO)

Bajaj Auto witnessed ~3% YoY growth in overall volumes with thetwo-wheeler segment growing 2.4% YoY and the three-wheeler

segment growing 6.5% YoY

Motorcycle volumes were at 301,361 units in the motorcyclesegment for January aided by handsome ~14% growth in the

export markets. However, domestic sales at 1,96,023 units

recorded a decline of ~3% YoY

In the three-wheeler segment, Bajaj Auto has witnessed growth of6.5% YoY at 46,263 units. Growth is expected to come from both

the domestic passenger carrier as new license roll-out increases.We expect norms for the quadricycle to be finalised in the coming

months. This can boost the volumes of BAL, as it has a ready

product to cater to the segment

Exports at 126,016 units (up ~5% YoY) have seen a recovery with2% MoM growth and ~10% YoY increase coming primarily from

the two-wheeler segment

Exhibit 8:Volume performance (in units)Segment Jan-13 Jan-12 %chg Dec-12 %chg YTD13 YTD12 %chg

Motorcycles 301,361 294,439 2.4 298,350 1.0 3,198,421 3,231,541 -1.0

3-wheelers 46,263 43,436 6.5 45,596 1.5 404,773 438,672 -7.7

Total 2&3 wheelers 347,624 337,875 2.9 343,946 1.1 3,603,194 3,670,213 -1.8

Exports(incl. in above) 128,482 116,996 9.8 126,016 2.0 1,310,634 1,349,406 -2.9

Exports as % of sales 37.0 34.6 36.6 - 36.8 34.2 -


ero Honda Motors: sales volumes

520

523

528 5

52

557

534

484

444

405

529

502 5

42

558

0

100

200

300

400

500

600

Jan'12

Fe

b'12

Mar'12

Apr'12

May'12

Jun'12

Ju

l'12

Aug'12

Sep'12

Oct'12

Nov'12

Dec'12

Jan'13

(000's)

urce: Siam, ICICIdirect.com Research

41

.6

42

.244

.0

44

.7

41

.0

33

.6 36

.445

.3

46

.5

56

.3

46

.1

57

.6

55

.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

Jan'12

Fe

b'12

Mar'12

Apr'12

May'12

Jun'12

Ju

l'12

Aug'12

Sep'12

Oct'12

Nov'12

Dec'12

Jan'13

(000's)


ajaj Auto: Two-wheeler sales volumes

294

302

301 3

42

322

318

309

304

315 3

61

327

298

301

0

50

100

150

200

250

300

350

400

Jan'12

Feb'12

Ma

r'12

Ap

r'12

May'12

Jun'12

Ju

l'12

Aug

'12

Sep'12

Oc

t'12

Nov'12

Dec'12

Jan'12

(000's)

ource: SIAM, ICICIdirect.com Research

ajaj Auto: Three-wheeler sales volumes

43

.4

41

.8

34

.73

9.3

30

.3

2

6.8

35

.34

0.6

44

.85

0.3

45

.6

45

.6

46

.3

2429

34

39

44

49

54

Jan'12

Fe

b'12

Mar'12

Apr'12

May'12

Jun'12

Ju

l'12

Aug'12

Sep'12

Oct'12

Nov'12

Dec'12

Jan'12

(000's)

`

urce: SIAM, ICICIdirect.com Research




Page 7

TVS Motors (TVSSUZ)

Overall two-wheeler sales clocked 171,513 units, a decline of ~1%YoY and ~10% MoM increase. Motorcycle volumes at 64,555

units, were up ~8% MoM but down ~2% in YoY terms. Its

domestic market share till December YTD is a meagre 5.5% in the

motorcycle segment. TVS Motors has launched a new modelPhoenix in the 125 cc segment. This is aiding in generate

incremental volumes in this segment for TVS

The overall scooter segment is witnessing a mild slowdown andTVS saw sales declining 8.5% YoY (37,946 units). However, on an

MoM basis, this was a handsome increase of ~25%.

The moped segment, at 69,012 units, has shown an increase of~4% YoY. The segment in which TVS is the lone player continues

to witness muted growth

Export markets were better this month with ~11% YoY and ~2%MoM growth, clocking 20,723 units. The contribution of exports tototal volumes has declined to 11.8% YTD from 13.6% YTD last

year


Motorcycles 64,555 65,608 -1.6 60,210 7.2 627,180 714,325 -12.2

Scooters 37,946 41,469 -8.5 30,398 24.8 381,762 453,004 -15.7

Mopeds 69,012 66,437 3.9 65,613 5.2 656,013 659,457 -0.5

Total Sales 171,513 173,514 -1.2 156,221 9.8 1,678,726 1,830,498 -8.3

Exports(incl. in above) 20,723 18,610 11.4 20,251 2.3 198,488 249,600 -20.5

Exports as % of sales 12.1 10.7 13.0 - 11.8 13.6

Source: Company, Siam The numbers of three-wheelers are not included in total volumes

VS Motors : Scooter sales volumes

4137

3936

39 3841

38 4044

37

30

38

0

10

20

30

40

50

Jan'12

Fe

b'12

Mar'12

Apr'12

May'12

Jun'12

Ju

l'12

Aug'12

Sep'12

Oct'12

Nov'12

Dec'12

Jan'13

(000's)


VS Motors: Motorcycles & mopeds volumes

1

32

1

32

141

136

134

127

117 116 12

5 139

129

12

6

1

34

0

30

60

90

120

150

Jan'12

Fe

b'12

Mar'12

Apr'12

May'12

Jun'12

Ju

l'12

Aug'12

Sep'12

Oct'12

Nov'12

Dec'12

Jan'13

(000's)





Page 8

Exhibit 10:Volume trends in executive segment

0

20

40

60

80

100120

140

160

180

200

Aug-1

0

Sep-1

0

Oct-10

Nov-1

0

Dec-1

0

Jan-1

1

Fe

b-1

1

Mar-11

Apr-11

May-1

1

Jun-1

1

Ju

l-11

Aug-1

1

Sep-1

1

Oct-11

Nov-1

1

Dec-1

1

Jan-1

2

Fe

b-1

2

Mar-12

Apr-12

May-1

2

Jun-1

2

Ju

l-12

Aug-1

2

Sep-1

2

Oct-12

Nov-1

2

Dec-1

2

Jan-1

3

(000's)

0

20

40

60

80

100120

140

160

180

200

(000's)

Bajaj Auto (LHS) Hero Motocorp (RHS)

Source: Siam volumes have been calculated with April 2009 as base with 100 Note: From April 2012, the executive

segment includes 125 cc sales

Exhibit 11:Volume trends in premium segment

80

130

180

230

280

330

380

430

Sep-1

0

Oct-10

Nov-1

0

Dec-1

0

Jan-1

1

Fe

b-1

1

Mar-11

Apr-11

May-1

1

Jun-1

1

Ju

l-11

Aug-1

1

Sep-1

1

Oct-11

Nov-1

1

Dec-1

1

Jan-1

2

Fe

b-1

2

Mar-12

Apr-12

May-1

2

Jun-1

2

Ju

l-12

Aug-1

2

Sep-1

2

Oct-12

Nov-1

2

Dec-1

2

Jan-1

3

(000's

)

80

130

180

230

280

(000's

)

Bajaj Auto (LHS) Hero Motocorp (RHS)

Source: Siam volumes have been rebased with April 2009 as base as base with 100 Note: From April 2012,

premium segment excludes 125 cc sales




Page 9

Four-wheeler industry

The passenger vehicles segment at 284,982 units has witnessed de-

growth of ~6% YoY, as the passenger car segment de-grew ~13% YoY in

January despite the new calendar year purchases. Exports have declined

~14% YoY and the domestic market saw 12.5% de-growth

Siam has, in the wake of the sluggish demand scenario for the passenger

car segment, cut its forecast for FY13E. Siam has indicated that the

passenger car segment will slip in the negative growth territory for the first

time in 10 years. However, we believe with the softening of RBIs stance

on policy rate, FY14E will witness a spurt in demand.

Going forward, OEMs will also aid in generating incremental volumes. The

new Alto 800 launched by Maruti has done well and so has M&Ms

Quanto.

The utility vehicle segment has been growing very fast (~56% YTD) and

has been contributing significantly to the passenger vehicle segment(~17%). The segment is now witnessing interest from all major OEM

players and, hence, competitive intensity is set to increase in this space.

Commercial vehicles continued to remain under pressure as a result of the

decline in industrial activity. The segment was down ~15% for January.

The M&HCV segment continued to reel under pressure and de-grew

~40% YoY. The LCV segment has managed to remain in the green after

slipping in the negative growth territory last month and saw ~5% YoY

growth compared with the 13.3% YTD growth rate.

Exhibit 12:Top 20 ModelsCurrent

Position Model Volume

Market

Share Jan'13 2012

1 Maruti Alto 28,685 12.5% 1 1

2 Maruti Swift 18,928 8.2% 2 2

3 Maruti DZire 17,060 7.4% 3 3

4 Maruti Wagon R 14,981 6.5% 14 4

5 Mahindra Bolero 10,659 4.6% 4 5

6 Hyundai i10 8,655 3.8% 10 9

7 Hyundai Eon 8,552 3.7% 6 6

8 Hyundai i20 8,261 3.6% 5 8

9 Maruti Ertiga 7,321 3.2% 8 7

10 Tata Indica/Vista 6,063 2.6% 7 12

11 Maruti Ritz 5,983 2.6% 9 16

12 Maruti Omni 5,385 2.3% 11 11

13 Renault Duster 5,240 2.3% 12 13

14 Ford Figo 5,066 2.2% 23 17

15 Toyota Innova 4,579 2.0% 27 24

16 Mahindra Scorpio 4,462 1.9% 19 19

17 Mahindra XUV500 3,944 1.7% 15 14

18 Hyundai Verna 3,721 1.6% 16 22

19 Hyundai Santro 3,554 1.5% 13 32

20 Tata Nano 3,048 1.3% 18 20

Source: Company, ICICIdirect.com Research




Page 10

Market share movement

According to Siam, the domestic market share for passenger vehicles

(PV) and commercial vehicles (CV) in January 2013 has been as follows:

Exhibit 13:Domestic market share movement in passenger vehicles

38.1

15.2

13.9

9.6

4.4

18.8

37.9

14.4

12.7

11.6

3.3

20.1

38.4

14.3

12.4

11.6

3.3

20.0

0 5 10 15 20 25 30 35 40 45

Maruti

Hyundai

Tata motors

M&M

GM

Others

(%)



Exhibit 14:Market share movement in A2 segment

35.1

23.3

33.9

57.0

47.6

58.6

0

10

20

30

40

50

60

70

Jan-1

1

Fe

b-1

1

Mar-11

Apr-11

May-1

1

Jun-1

1

Ju

l-11

Aug-1

1

Sep-1

1

Oct-11

Nov-1

1

Dec-1

1

Jan-1

2

Fe

b-1

2

Mar-12

Apr-12

May-1

2

Jun-1

2

Ju

l-12

Aug-1

2

Sep-1

2

Oct-12

Nov-1

2

Dec-1

2

Jan-1

3

(%)

Hyundai Maruti

Source: Siam, Top two PV OEMs considered

The market share for Maruti has begun to improve after the

plant lockout situation came to an end. We feel Maruti will

approach its long-term share of 40% in the market with

addition of new diesel capacity

The A2 segment is the bread and butter category of the

passenger car segment. The segment had seen a drop in

volumes owing to a lack of options among diesel variants.

As OEMs focus on bringing diesel variants in this segment,

volumes are expected to pick up




Page 11

Exhibit 15:Domestic market share movement in commercial vehicle

10.4

17.9

58.5

13.312.7

19.5

56.6

11.213.0

19.5

56.3

11.2

0

10

20

30

40

50

60

70

ALL M&M Tata Motors Others

(%)


Source: Siam Data used is YTD

Exhibit 16:Segmental share in CVs

29.929.9

40.6

70.170.1

57.3

0

10

20

30

40

50

60

70

80

Fe

b-1

1

Mar-11

Apr-11

May-1

1

Jun-1

1

Ju

l-11

Aug-1

1

Sep-1

1

Oct-11

Nov-1

1

Dec-1

1

Jan-1

2

Fe

b-1

2

Mar-12

Apr-12

May-1

2

Jun-1

2

Ju

l-12

Aug-1

2

Sep-1

2

Oct-12

Nov-1

2

Dec-1

2

Jan-1

3

(%)

M&HCV LCV

Source: Siam

Exhibit 17:Auto raw material index

80

100

120

140

160

180

200

220

240

Fe

b-0

9

Apr-09

Jun-0

9

A

ug-0

9

Oct-09

Dec-0

9

Fe

b-1

0

Apr-10

Jun-1

0

A

ug-1

0

Oct-10

Dec-1

0

Fe

b-1

1

Apr-11

Jun-1

1

A

ug-1

1

Oct-11

Dec-1

1

Fe

b-1

2

Apr-12

Jun-1

2

A

ug-1

2

Oct-12

Dec-1

2

Source: Bloomberg,Reuters,Company,ICICIdirect.com Research

Despite a slowdown in the M&HCV segment, LCVs

continued to witness a high growth rate. ALL and M&M

have gained and maintained market share, respectively, on

the back of their LCV offerings

The LCV segment has put up a stellar performance in the

past few months and gained in terms of share in the CV

segment. The LCV: MHCV ratio is fast approaching the

70:30 ratio that is the norm in most countries

The in-house raw material index reflects the combination of

various input materials (steel, rubber, aluminium, plastics)

for OEMs, which have February 2009 as base year at 100.

The chart shows a declining trend in raw material prices,

which is a positive for the industry. The impact in rupee

terms would kick in once the INR appreciates against the

US$




Page 12

Maruti Suzuki India (MARUTI)

Maruti Suzuki reported 1.1% YoY de-growth in January even asexport markets saw a significant decline of 22% YoY. The

domestic markets were subdued even in the wake of new calendar

year purchases. With the new Alto launch, Maruti has been able togenerate volume growth even as the overall passenger car

segment is witnessing severe pressure. Ertiga continues to

manage a healthy run rate and remains one of Marutis top

performers

Domestic sales at 103,026 units have grown at 2% YoY even asthe industrys domestic car segment has de-grown 12% YoY

The bread and butter segment - A2 (Alto, Swift, Wagon-R, Zen, A-star and Ritz) reported 69,285 units, a sharp 28% MoM

improvement. On a YoY basis, this represents ~8% volume de-

growth. The C segment (Omni, Versa and Eeco) at 8,374 units was

down ~33% on a YoY basis. The entry of M&Ms Maxximo

Minivan in the diesel variant is likely to further erode market share

of the Eeco and Omni in the van/SCV segment

Exports decreased ~22% YoY to clock 11,179 units as allsegments except the Dziresaw a decline in volumes


M800* 1,200 2,114 -43.2 1,200 0.0 12,790 17,067 -25.1

Omni, Eeco,Versa 8,374 12,439 -32.7 7,897 6.0 92,878 118,320 -21.5

Alto, Wagon-R, Zen,Swift,Ritz 69,285 75,678 -8.4 54,079 28.1 535,834 552,334 -3.0

SX4, Swift Dzire 18,072 10,576 70.9 13,405 34.8 136,766 93,057 47.0

Kizashi 0 9 -100.0 45 -100.0 174 396 -56.1

Total Passengers 96,931 100,816 -3.9 76,626 26.5 778,442 781,174 -0.3

Gypsy, Vitara,Ertiga 6,095 231 2538.5 5,447 11.9 66,747 4,765 1300.8

Total Domestic 103,026 101,047 2.0 82,073 25.5 845,189 785,939 7.5

Exports 11,179 14,386 -22.3 13,072 -14.5 96,729 102,855 -6.0

Total Sales 114,205 115,433 -1.1 95,145 20.0 941,918 888,794 6.0

Exports as % of sales 9.8 12.5 13.7 10.3 11.6

Source: Company, Siam. * estimates

aruti Suzuki India: sales volumes

115 119126

100 99 97

82

54

94103 103

95

114

-10

10

30

50

70

90

110

130

Jan'12

Fe

b'12

Mar'12

Apr'12

May'12

Jun'12

Ju

l'12

Aug'12

Sep'12

Oct'12

Nov'12

Dec'12

Jan'13

Volume(000's)


aruti Suzuki India: Export performance

13.2

10.29.4

13.1

11.2

4.0

7.1

12.313.1

11.2

14.4

11.3

5.2

3

5

7

9

11

13

15

J

an

'12

F

eb'12

M

ar'

12

A

pr'

12

M

ay

'12

J

un

'12

Ju

l'12

A

ug

'12

S

ep

'12

O

ct'

12

N

ov

'12

D

ec

'12

J

an

'13

(000's)

-100

-80

-60

-40

-20

0

20

40

60

80

100

Yo

Ygrowth

(%)





Page 13

Tata Motors (TELCO)

Tata Motors saw a decline of ~30% YoY in its overall volumes.The passenger vehicle segment, at 15,708 units, showed a decline

of ~55% YoY as demand for the Indica and Indigo declined

substantially with sluggish overall demand and availability of

newer models from competitors available at discount. Tata Motorshad also announced a cut in price of the Indica in order to boost

sales. The utility vehicle (UV) numbers at 4,100 units de-grew

~34% YoY despite the launch of the Safari Storme. Passenger

cars posted a decline of ~60% YoY as high fuel prices combined

with old product portfolio led to a stagnation in volumes. Sales of

the Nano have declined to ~1500 units, an 80% YoY decline

At a segmental level, in standalone operations, CV demand hasdeclined ~12% YoY and ~10% MoM. CV sales at 45,952 units

have managed to show a slightly lower volume de-growth due to

a good show by the LCV segment (36,583 units), which has grown

~15% YoY even as the overall LCV segment has grown only 5%.M&HCV sales continued the rather poor performance and dropped

~54% YoY largely owing to the poor demand scenario

JLR has posted highest ever volumes at 38,173 units for January.Jaguar Land Rover has been aggressively pursuing product

development and the next few months will witness more product

launches. The Chinese market has grown ~64% YTD for JLR and

has now become the largest market in volume terms. We expect

sales to improve in H2 on the back of newer global launches of

Jaguar and the new Range Rover and also aggressive expansion

of distribution points in China

Exports at 3,880 units have not been performing well since the lastquarter and posted a decline of ~45% YoY in January


M & HCV 9,369 20,193 -53.6 10,641 -12.0 124,848 177,623 -29.7

LCV 36,583 31,883 14.7 40,298 -9.2 341,611 288,512 18.4

Utility vehicles 4,100 6,182 -33.7 3,008 36.3 41,813 42,557 -1.7

Passenger Cars 11,608 29,209 -60.3 11,635 -0.2 162,832 205,357 -20.7

Total sales 61,660 87,467 -29.5 65,582 -6.0 676,044 714,049 -5.3

Exports 3,880 7,083 -45.2 3,882 -0.1 43,951 52,108 -15.7

Exports as % of sales 6.3 8.1 5.9 6.5 7.3Source: Company, Siam

ata Motors: CVs sales volume

52

.15

6.6

62

.4

36

.943

.4 46

.4

4

2.4

48

.75

3.3

50

.4

48

.1 50

.9

46

.0

Jan'12

Fe

b'12

Mar'12

Apr'12

May'12

Jun'12

Ju

l'12

Aug'12

Sep'12

Oct'12

Nov'12

Dec'12

Jan'13

(000's

)

a Motors:

ata Motors: PVs sales volume

35.4 35.5

38.0

23.2

21.0

17.9

26.8

23.1 22.421.4

18.4

14.615.7

Jan'12

Fe

b'12

Mar'12

Apr'12

May'12

Jun'12

Ju

l'12

Aug'12

Sep'12

Oct'12

Nov'12

Dec'12

Jan'12

(000's

)

guar Land Rover sales volume

25.1 2

6.9

24

.1

38

.2

32

.334

.5

27

.9

26

.528

.230

.1

36

.5

32

.3

29

.3

0

20

40

60

80

00

Jan'12

Fe

b'12

Mar'12

Apr'12

May'12

Jun'12

Ju

l'12

Aug'12

Sep'12

Oct'12

Nov'12

Dec'12

Jan'13

10

15

20

25

30

35

40

45

50

(000's

)

Jaguar Land Rover

JLR total volumes(RHS)

rce: Company, ICICIdirect.com Research:




Page 14

Mahindra and Mahindra (MAHMAH)

Mahindra and Mahindra (M&M) has outperformed the passengervehicle segment on the back of its strong UV portfolio. The utility

vehicle segment, inclusive of four-wheeler pick-ups, grew to

39,506 units, a ~23% YoY jump and ~12% sequential growth. It

enjoys a domestic market share of ~48% in the UV segment,which has reduced from the highs of 56% in 2012 owing to an

increase in the competitive intensity in this segment. With the

launch of the Quanto and the high-end Rexton, M&M looks set to

ride the growing demand for utility vehicles in India

The new-look Verito has witnessed a continuous reduction involumes to ~1,500 units from the highs of ~2,000 units in August.

However, this represents an improvement over last month, which

saw a volume of only 1,026 units

Automotive exports at 345 units have seen ~90% YoY slump The farm equipment segment (FES) at 19,362 units saw a flat YoY

growth in January, which was a 31% MoM increase. Domestic

volumes declined ~3% YoY but increased ~30% sequentially at

17,473 units. Exports have improved by ~34% YoY owing to the

low base of last year. Lowering of interest rates can be a positive

trigger for this segment and would help in improving the offtake in

the agri-related segment


UVs (inclusive of pick ups) 39,506 32,171 22.8 35,441 11.5 358,666 287,674 24.7

CVs 1,024 1,543 -33.6 631 62.3 9,559 11,049 -13.5Verito 1,500 1,529 -1.9 1,026 46.2 13,101 14,594 -10.2

Total 4wheeler 42,030 35,243 19.3 37,098 13.3 381,326 313,317 21.7

3wheeler (Champion, Alfa) 5,811 6,126 -5.1 5,209 11.6 55,950 57,240 -2.3

Total Domestic 47,841 41,369 15.6 42,307 13.1 437,276 370,557 18.0

Exports 345 3,349 -89.7 2,990 -88.5 26,352 23,892 10.3

Total Sales 49,503 44,718 10.7 45,297 9.3 463,628 394,449 17.5

Exports as % of sales 3.4 7.5 6.6 5.7 6.1

Tractors - Domestic 17,473 17,950 -2.7 13,712 27.4 181,995 191,617 -5.0

- Exports 1,889 1,404 34.5 1,047 80.4 10,408 11,037 -5.7

Total Tractors 19,362 19,354 0.0 14,759 31.2 192,403 202,654 -5.1

Exports as % of tractor sales 9.8 7.3 7.1 5.4 5.4


hindra and Mahindra: Sales volume

44

.7

43

.1 47

.0

40

.7 44

.0

4

1.3

47

.1

45

.8 48

.35

3.4

48

.1

45

.3 49

.5

15

20

25

30

35

40

45

50

55

Jan'12

Feb'12

Mar'12

Apr'12

May'12

Jun'12

Jul'12

Aug'12

Sep'12

Oct'12

Nov'12

Dec'12

Jan'13

(

)

rce: SIAM, ICICIdirect.com Research

hindra and Mahindra: Tractor sales

19

.4

15

.3 17

.4

16

.8 19

.02

3.8

16

.5

13

.21

8.9

29

.6

20

.5

14

.81

9.4

0

5

10

15

20

25

30

35

Jan'12

Fe

b'12

Mar'12

Apr'12

May'12

Jun'12

Ju

l'12

Aug'12

Sep'12

Oct'12

Nov'12

Dec'12

Jan'13

(000s)

rce: SIAM, ICICIdirect.com Research




Page 15

Ashok Leyland (ASHLEY)

Ashok Leyland (ALL) has managed to post ~2.5% growth rate inthe CV space on the back of handsome growth in the LCV

segment. Dost at ~3,700 units accounted for ~35% of the total

ALL volumes for January. The M&HCV space has declined ~25%

YoY, which is slightly better than the decline in demand in thesegment for January

The Ashok Leyland-Nissan partnership has decided to ramp upproduction of Dost looking at its huge demand and make it

available pan-India in the coming months. Dost enjoys ~30%

share in the 11 states where it is sold right now

Exports have seen a decline of ~37% YoY in January 2013 withsales clocking just 719 units. The export contribution to total sales

has been progressively reducing in the last few months. The trend

continued in this month as well with exports contributing merely

6.8%, down from 11.2% in January last year. Exports are likely towitness an increase following the healthy order book for

passenger carriers in export markets like Africa and East Asia and

launch of the new Janbus and trucks developed on the new

Neptune platform


M&HCV Passenger 1,662 2,567 -35.3 1,644 1.1 18,253 19,645 -7.1oo s , , -20.7 , . 44,062 52,238 -15.7

LCV 3,698 1,172 215.5 2,064 79.2 28,689 4,537 532.3

Total Sales 10,565 10,300 2.6 7,294 44.8 91,004 76,420 19.1

Exports 719 1,149 -37.4 575 25.0 7,506 9,935 -24.4

Exports as % of sales 6.8 11.2 7.9 - 8.2 13.0


shok Leyland: Total sales

10

.3 11

.1

14

.3

8.7

8.6

10

.2

9.8

9.4

10

.6

8

.0

7.7

7.3

10

.6

0

2

4

6

8

10

12

14

16

Jan'12

Fe

b'12

Mar'12

Apr'12

May'12

Jun'12

Ju

l'12

Aug'12

Sep'12

Oct'12

Nov'12

Dec'12

Jan'12

(0

00's)

urce: SIAM, ICICIdirect.com Research




Page 16

ICICIdirect.com Research Universe (Auto & Auto ancillary)CMP M Cap

(|) TP(|) Rating (| Cr) FY13E FY14E FY15E FY13E FY14E FY15E FY13E FY14E FY15E FY13E FY14E FY15E FY13E FY14E FY15E

Amara Raja (AMARAJ) 296 357 Buy 5,052 18.0 21.7 25.5 16.4 13.6 11.6 10.7 8.3 7.0 38.4 38.6 36.8 29.3 27.8 26.1

Apollo Tyre (APOTYR) 85 112 Buy 4,292 12.4 13.5 16.0 6.9 6.3 5.3 4.7 3.3 2.8 18.0 16.0 16.3 18.3 14.5 14.8

Ashok Leyland (ASHLEY) 23 30 Buy 6,054 1.4 2.7 3.3 16.6 8.6 6.8 1 1.1 7.0 3.2 6.9 12.8 14.2 8.7 15.9 16.6Automotive Axle (AUTAXL)* 324 400 Buy 490 29.8 43.0 53.4 12.2 8.5 6.8 6.0 4.5 3.6 22.6 26.7 28.3 16.6 20.4 21.1

Bajaj Auto (BAAUTO) 2,007 1,915 Hold 58,077 106.5 123.4 136.8 18.8 16.3 14.7 15.9 15.2 12.7 58.2 48.3 41.1 40.5 37.6 33.6

Balkrishna Ind. (BALIND) 278 356 Buy 2,685 35.8 41.0 41.0 7.8 6.8 6.8 6.4 5.6 4.7 15.6 15.6 16.6 24.6 15.6 15.6

Bharat Forge (BHAFOR) 218 259 Buy 5,084 17.7 12.9 16.9 12.3 16.9 12.9 6.9 7.4 6.0 13.4 10.1 13.2 18.9 12.4 14.5

Eicher Motors (EICMOT)` 2,686 3,065 Hold 7,250 120.1 156.9 226.0 22.4 17.1 11.9 16.7 12.1 5.1 16.6 18.4 21.7 18.5 20.0 22.9

Escorts (ESCORT)* 64 59 Hold 761 5.8 10.5 14.6 11.9 6.7 4.8 6.4 4.3 3.4 6.5 9.3 10.9 4.3 7.4 9.5

Exide Industries (EXIIND) 129 135 Hold 10,931 5.4 6.0 8.6 23.7 21.6 15.0 13.0 11.3 7.8 19.1 19.4 24.0 15.1 14.8 18.3

Hero Mototcorp (HERHON) 1,661 1,799 Hold 33,170 96.6 107.8 149.9 17.2 15.4 11.1 10.0 11.6 9.6 38.0 40.6 44.9 37.3 34.3 37.0

JK Tyre & Ind (JKIND) 111 180 Buy 455 2.7 33.8 44.9 41.3 3.3 2.5 7.8 5.3 4.3 7.3 12.3 13.9 1.6 17.4 19.0

M&M (MAHMAH) 904 980 Hold 53,250 50.7 61.6 72.5 17.8 14.7 12.5 11.0 8.8 7.1 21.9 22.7 23.0 22.7 22.7 21.9

Maruti Suzuki (MARUTI) 1,497 1,784 Buy 43,265 68.3 103.5 132.1 21.9 14.5 11.3 11.9 8.0 5.9 10.9 16.4 18.9 11.7 15.3 16.5

Motherson (MOTSUM) 201 212 Hold 11,666 7.4 15.0 15.4 27.3 13.3 13.1 8.9 6.3 4.9 13.1 20.2 21.0 20.6 31.5 25.5

Subros (SUBROS) 27 35 Buy 162 8.1 3.0 8.6 3.3 9.1 3.1 5.1 4.1 3.4 7.2 7.7 12.0 17.9 6.3 15.9

Tata Motors (TELCO) 298 360 Buy 88,547 28.0 42.5 55.1 10.6 7.0 5.4 4.5 3.7 3.1 22.2 23.8 24.9 22.7 27.2 27.2

Sector / Company

RoE (%)EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)

Source: ICICIdirect.com Research *Year ending September




Page 17

ICICIdirect.com Universe price movement vis--vis BSE Auto index

Exhibit 22:OEM comparison with BSE Auto

BSE Auto

Hero MotoCorp

Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13

BSE Auto Bajaj Maruti

Tata Motors M & M EscortsHero MotoCorp Ashok Leyland Eicher Motors

Source:ICICIdirect.com Research

Exhibit 23:Ancillaries comparison with BSE AutoBSE Auto

Amara Raja

Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13

BSE Auto Auto Axl Bharat Forge Balkrishna JK Tyres

Apollo Tyres Subros Motherson Exide Inds Amara raja

Bharat

Source: ICICIdirect.com Research

The chart compares the movement of OEM stocks in the

ICICIdirect.com Universe with the BSE Auto index, thereby

reflecting the degree of mimicking of the index

Since May 2011, Eicher Motors, Tata Motors and Hero

MotoCorp have outperformed the BSE Auto index while

Escorts has underperformed on the index by being

divergent on the upside and downside, respectively

The chart compares the movement of auto ancillary stocks in

the ICICIdirect.com universe with the BSE Auto index

The volatile nature of smaller ancillary companies is reflected.

These have met with numerous fluctuations with the

exception of larger market capitalisation companies likeBharat Forge and Exide Industries, which mimic the index

greatly. The tyre companies post July 2011 have grossly

outperformed due to the reduction in rubber prices. Amara

Raja Batteries has significantly outperformed the auto

ancillary universe



18/18

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 500

Pankaj Pandey Head Research [email protected] Research Desk,ICICI Securities Limited,1st Floor, Akruti Trade Centre,Road No 7, MIDC,Andheri (East)

Mumbai 400 093

[email protected]

We /I, Nishant Vass MBA (FINANCE) Venil Shah MBAresearch analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our

personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or

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motogaze - icici february 2013

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