MotoGaze September, 2014

September 16, 2014

Sector View

Green shoots turning into steady growth!!!

Equalweight

Momentum continues as festive season ramp-up begins

Volume performance
Company
Hero Motocorp
Bajaj Auto
TVS Motors
Maruti Suzuki
Tata Motors
Mahindra and Mahindra
Ashok Leyland

Gr.

YoY(%)
21.4
7.9
46.6
26.9
-17.6
-7.2
16.7

Key players & industry volume growth Aug14 (%)

4.4

Industry

17.2

MoM gr

5.4
7.9
5.5

BAL
TVS

46.6

12.1
20.1

HMSI
-2.7

New launches in pre-festive season to set the tone!

26.9

Maruti

With the auto industry finally showing signs of a recovery after nearly two
years of demand slump, the festive season is likely to be eagerly awaited
by OEMs. New launches and product refreshes are the key, going ahead,
as new product launches clearly aid in revival of sentiments by pulling
consumers to showrooms. Success of new products like Ecosport, Grande
i10, Celerio and huge bookings for the newly launched Mobilio are
testament to the same.

9.3

-17.6 TML
-7.2
M&M -1.1
Hyundai

YoY gr

21.4

HMCL

3.2

-8.0
0.2

ALL

16.7

6.6

Macro tailwinds likely to pick up with economic revival!

Source: Siam

To provide a boost to the auto sector, excise duty cuts have been
extended by about six months to December. Going ahead, with an
improvement in overall economic activity, we believe macro headwinds
like currency, interest rate and inflation will turn positive and help the
industry. However, the dampener to our assumptions can be lower-thanexpected monsoons in the last leg, which may depress rural demand.

Key players & industry volume growth YTD (%)

Industry

13.7

HMCL

11.8

BAL

Industry outlook

4.6
28.2

TVS

30.6

HMSI
Maruti
-25.0

17.2

TML
-7.4 M&M
-7.8

August saw the momentum continuing as inventory ramp-up for the

festive season has begun. With expectations of strong festive season
growth as the economy revives, we expect a strong ramp-up in channel
inventory for September as well. Also, with the monsoon deficit reducing,
sentiment has picked up. The volume growth was led by the two-wheeler
(2-W) segment, which grew ~19% YoY to ~1.6 million units. The scooter
segment continued to lead the way and outperformed the industry with
~31% YoY growth aided by new product launches by Yamaha and TVS as
well as capacity expansion from HMSI. The motorcycle segment grew
~14% YoY with strong growth coming from market leader HMCL (up 24%
YoY). However, HMSI and BALs performance in the motorcycle segment
has been disappointing (~2%, ~4% YoY growth). The passenger vehicles
segment saw sustained growth and grew ~7% YoY. Domestic volumes
grew ~13% YoY while exports de-grew ~11% YoY. The overall utility
vehicle segment grew ~22% YoY. The CV segment is the only one to
witness a decline and de-grew ~4% YoY. However, the M&HCV segment
has seen a recovery and grew 12% YoY for the month. The LCV segment,
however, continued to witness pressure and fell ~11% YoY.

Hyundai
-3.8
ALL

Source: Siam

Analysts name
Nishant Vass
nishant.vass@icicisecurities.com
Venil Shah
venil.shah@icicisecurities.com

ICICI Securities Ltd. | Retail Equity Research

We expect an improvement in demand sentiments and believe the overall

industry will grow 10-12% for FY15E. For the passenger vehicle segment,
we expect 7-9% growth while the M&HCV segment is likely to improve 57% with a major recovery likely in H2. The LCV segment is likely to
underperform the M&HCV segment and remain flat. The 2-W segment is
likely to grow ~11-13%, led by strong growth in the scooter segment and
macro factors helping discretionary spending. On a longer term basis, we
remain positive on the growth prospects of the industry with a rise in
incomes augmenting auto penetration levels in the country.
On the basis of index performance, for August, the BSE Auto index (1.6%)
has marginally underperformed the BSE Sensex (up 1.9%). Among our Idirect auto coverage, we remain bullish on frontline OEM stocks like Tata
Motors, Bajaj Auto as well as Eicher Motors. Also, we believe valuations
for ancillary stocks are likely to remain on an uptrend as earnings grow on
the favourable impact of operating leverage on increased demand as well
as favourable raw material prices. We continue to remain positive on the
tyre sector.

Two & three wheeler industry

The domestic two-wheeler industry saw ~19% YoY growth to 1.34 million
units in August as major OEMs have pushed inventory in the system on
expectations of a strong festive season. The scooter segment continued to
outperform the industry with growth of ~31% YoY while the motorcycle
segment witnessed growth of ~10% YoY.
The three-wheeler industry at 91,726 units has grown ~37% YoY with the
domestic segment growing ~24% YoY while the export market has seen
~60% YoY growth (led by BAL, which witnessed ~70% YoY growth).

Market share movement

According to data released by the Society of Indian Automobile
Manufacturers (Siam), the domestic market share of two and threewheeler players is as below for August 2014.
The 2-W segment has seen a bit of a turnaround in

Exhibit 1: Domestic market share movement in two-wheelers

fortunes with the festive season showing good growth.

45

Segment leader HMCL has shown good growth even as

40

aggressive competitor HMSI has gained market share with

42.741.8

41.4

Aug-13

Jul-14

Aug-14

35

enhanced production capacity ensuring lower waiting

periods

(%)

30

25.125.6

25
20

22.2
15.2

15

11.712.7

11.711.4

12.9
8.1 8.8 8.7

10
5
0
Bajaj Auto

Hero Motocorp

TVS motor

HMSI

Others

Source: Siam, Data used is YTD

Exhibit 2: Domestic market share movement in three-wheelers

The domestic 3W market has started improving from the
start of the year and is up ~17% YTD

Aug-13

11.9
11.9
11.8

Others

Jul-14

Aug-14

9.9
9.8
11.4

M&M

31.8
31.9

Piaggio

35.2
46.4
46.4

Bajaj Auto
41.6
0

10

15

20

25
(%)

30

35

40

45

Source: Siam, Data used is YTD

ICICI Securities Ltd. | Retail Equity Research

Page 2

50

Hero MotoCorp continues to be the market leader in the

Exhibit 3: Domestic market share movement in motorcycles

executive and economy segments. High fuel prices and an

60

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

Aug-13

52.8 53.9 53.8

overall reduction in discretionary spending have started to

Jul-14

Aug-14

50

of MNC OEMs like HMSI, Suzuki and Yamaha that have

shifted the focus to the economy segment

(%)

40
30
21.2
17.0 16.6

20

14.5 15.8 16.0

10

5.4 5.9 6.0

0
Bajaj Auto

Hero Motocorp

TVS motor

Honda

Source: Company, ICICIdirect.com Research

HMSI continues to be the clear leader in the scooter

Exhibit 4: Domestic market share movement in scooters/scooterettes

segment. The scooter segment remains one of the fastest

55

growing segments in the entire automobile industry. HMCL

has continued to gain market share in the scooter segment

Aug-13

Jul-14

Aug-14

50.7 53.7 54.8

45

while TVS has continuously lost market share

(%)

35

25

20.5
17.3 16.3
12.5

15

16.4

15.1 15.6

13.9 13.3

-5

Hero Motocorp

TVS Motors

Honda

Others

Source: Siam, Data used is YTD

ICICI Securities Ltd. | Retail Equity Research

Page 3

Exhibit 5: Market share movement in executive motorcycle segment*

The executive motorcycle segment continues to be

70

20
56.1

60

lost market share while HMSI has gained share

handsomely

16

(%)

50

16.3
12

40

(%)

dominated by Hero MotoCorp. HMCL, BAL and TVS have

7.1

30

20
20.5 4

10

0
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14

Bajaj Auto (RHS)

Hero Motocorp

TVS (RHS)

HMSI (RHS)

Source: Siam * only top 4 two-wheeler OEMs

Exhibit 6: Market share movement in greater than 125 cc segment

90

75.5

80

30

70

25

50

15.5

40

20
15

15.4

30
20

10

9.1 5

10

0
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14

Bajaj Auto (LHS)

Hero Motocorp (RHS)

TVS (RHS)

HMSI (RHS)

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

ICICI Securities Ltd. | Retail Equity Research

Page 4

(%)

60
(%)

35

Hero MotoCorp (HERHON)

Hero MotoCorp: Sales volumes

61

600
500

56

63

68

66

60

57

61

55

60

404
409

10
Aug'14

Jun'14

Apr'14

Feb'14

Dec'13

Oct'13

Aug'13

Scooters

Exhibit 7: Volume performance (in units)

Source: Siam, ICICIdirect.com Research

Segment
Motorcycles
Scooters
Total Sales
Exports(inc. above)
Exports (% of sales)
Source: Company, Siam

400
52

43

43

45

45

40

44

45

44

39

36

100

35
30

Three-Wheelers

Source: Siam, ICICIdirect.com Research

Aug'14

Jun'14

Apr'14

Feb'14

Dec'13

Oct'13

0
Aug'13

%chg
Jul-14
5.6
472,996
56,866 4.2
529,862 5.4
13,201 75.0
2.5 164 bps

YTD'15
2,495,103
308,497
2,803,600
72,962
2.6

YTD'14
%chg
2,228,708 12.0
278,115 10.9
2,506,823 11.8
51,502 41.7
2.1 55 bps

Over the past few months, Bajaj Autos volume performance in the
domestic markets has been under pressure as its entry-level
segment (<=125 cc) has seen ~16% YoY drop in volumes. The
>125 cc < 150 cc segment has, however, done well in the
domestic markets and seen growth of ~20% YoY

The three-wheeler (3-W) segment has seen a strong rebound in

volumes in both the domestic and export markets. The domestic
segment saw ~43% YoY increase while the export market saw
~70% YoY jump (on a low base)

The slowdown in domestic markets has been offset by the strong

export growth. The contribution of exports, in volume terms,
stood at ~52%, compared to ~47% last year due to a decline in
domestic volumes and the low base of last year. On a YTD basis,
exports contribution stands at ~48%

40

50

Two-Wheelers

Aug-13
%chg
404,278 23.5
55,718 6.3
459,996 21.4
9,850 134.6
2.1 200 bps

50

(%)

34

51

279
324
348
279
261
281
273
271
300
313
262
268
284

('000s)

46

53

32
37
37
40
34
32
38
43
51
53

44
37

55

350

Aug-14
499,380
59,229
558,609
23,106
4.1

Bajaj Auto (BAAUTO)

Bajaj Auto: Sales volumes

150

For the month, exports have continued at a neck-breaking growth

of ~130% YoY, albeit on a low base. Even MoM, the growth is
~75% with the scooter segment contributing most to this growth.
The management expects exports to start contributing more
meaningfully from this year as the markets seeded in the previous
year start showing traction in a few quarters

30
20

Motorcycles

200

40

250

The domestic motorcycle segment at 5.0 lakh units grew ~24%

YoY while the domestic scooter segment has de-grown ~15%
YoY as scooter exports for the month stood at ~12500 units

('000s)

50

100

300

70

57 59

565
473
462
495
450
456
506
537
480
473
499

('000s)

200

Hero MotoCorp, the market leader in the 2-W segment, saw strong
volume growth (~21% YoY) as it is betting big on the festive
season growth, thereby pushing inventory to dealers

80

65 66

400
300

% exports

Exhibit 8: Volume performance (in units)

Segment
Total 2-wheeler sales
2W exports
2W domestic sales
Total 3-wheeler sales
3W exports
3w domestic sales
Total Sales
Total Domestic Sales
Total Exports
Exports as % of sales
Source: Company, Siam

ICICI Securities Ltd. | Retail Equity Research

Aug-14
284,302
146,955
137,347
52,538
28,172
24,366
336,840
161,713
175,127
52.0

Aug-13
%chg
278,583
2.1
127,594
15.2
150,989
-9.0
33,605
56.3
16,566
70.1
17,039
43.0
312,188
7.9
168,028
-3.8
144,160
21.5
46.2 581 bps

Jul-14 %chg
YTD'15
6.1 1,427,001
267,841
2.9
142,788
674,017
9.8
125,053
752,984
2.1
51,451
217,561
4.5
26,967
112,832
-0.5
24,484
104,729
5.5 1,644,562
319,292
8.1 857,713
149,537
3.2
169,755
786,849
47.8
53.2 -117 bps

YTD'14
1,385,562
509,745
875,817
187,228
107,001
80,227
1,572,790
956,044
616,746
39.2

Page 5

%chg
3.0
32.2
-14.0
16.2
5.4
30.5
4.6
-10.3
27.6
863 bps

TVS Motors (TVSSUZ)

TVS Motors : Scooter sales volumes

Overall sales at ~2.3 lakh units grew ~46% YoY, with the moped
segment growing ~32% YoY growth on a low base while other
segments boosted by new launches have also done well.
Motorcycle volumes grew ~36% YoY while the scooter segment
saw sustained momentum and grew ~84% YoY

The moped segment has witnessed growth with an overall

improvement in the demand scenario. However, the segment that
has hitherto been in a downturn till last year is seeing an increase
in demand and is up ~10% YTD

Export markets have continued to do well for TVS with the

segment growing ~28% YoY for the month. Three-wheeler
exports at ~8000 units grew ~32% YoY and have driven the sharp
growth in 3-W volumes this year

240
67
57
67

61

83

62

77

54

57

85

75

46
74

73
48
68

63

69

66

45

42

65

63

60

38

42

61

58

56

63

46
42
82

51
36

40

43

80

83

120

61

(%)

160

62

200

Motorcycles

Scooters

Aug'14

Jun'14

Apr'14

Feb'14

Dec'13

Aug'13

Oct'13

Mopeds

Source: Siam, ICICIdirect.com Research

Exhibit 9: Volume performance (in units)

Segment
Motorcycles
Scooters
Mopeds
Total 2-W Sales
3-Wheelers
Total Sales
Exports(incl. in above)
Exports as % of sales

Aug-14
83,332
67,240
67,090
217,662
9,820
227,482
35,074
16.1

Aug-13
61,313
36,478
50,678
148,469
7,063
155,532
27,425
18.5

%chg
35.9
84.3
32.4
46.6
39.0
46.3
27.9

Jul-14
76,767
60,619
56,742
194,128
8,964
203,092
36,986
19.1

%chg
8.6
10.9
18.2
12.1
9.5
12.0
-5.2
-

YTD'15
393,982
284,376
311,603
989,961
43,766
1,033,727
169,623
17.1

YTD'14
312,669
175,501
284,169
772,339
31,363
803,702
125,724
16.3

%chg
26.0
62.0
9.7
28.2
39.5
28.6
34.9

Source: Company, Siam

Honda Motorcycles and Scooters India (HMSI)

HMSI: Motorcycles scooter sales volumes

450

Overall sales have continued to grow strongly (~26% YoY) led by

strong scooter volumes as demand continues to be strong in the
segment. HMSI has benefitted by expanding its distribution
network and production volumes

Motorcycle segments have seen muted growth with ~4% YoY

growth overall, with domestic volumes growing ~6% YoY while
the scooter segment grew 48% YoY and has continued to
outperform the industry with strong growth momentum

Export markets have also done well but with HMSIs focus more
firm on the domestic markets, the segment remains a small part of
HMSIs volume pie (~4%)

400

224

218

158

153

Jul'14

Aug'14

195

Jun'14

172

160

151

May'14

176

181

176

200

171

168

193

166

250

152

('000s)

300

202

350

190

138

152
Feb'14

Apr'14

163
Jan'14

183
Oct'13

151

163

125

157

50

Sep'13

100

Aug'13

150

Motorcycles

Source: Siam, ICICIdirect.com Research

Mar'14

Dec'13

Nov'13

Scooters

Exhibit 10: Volume performance (in units)

Segment
Motorcycles
Scooters
Total Sales
Exports(incl.above)
Exports as % of sales
Source: Company, Siam

ICICI Securities Ltd. | Retail Equity Research

%chg
Aug-14
Aug-13
%chg
Jul-14
YTD'15
YTD'14
3.2
162,715 156,629
3.9 157,746
769,966
639,426
0.7
225,308 152,303
47.9 223,665
992,275
697,363
1.7 1,762,241 1,336,789
388,023 308,932
25.6 381,411
42.9
17,152 17,242
-0.5 12,000
68,248
57,645
4.4
5.6
-116 bps
3.1
-315 bps
3.9
4.3

Page 6

%chg
20.4
42.3
31.8
18.4
-44 bps

Four-wheeler industry
The overall passenger vehicles segment at ~267,000 units has seen an
increase of 7% YoY. Domestically, the growth has been ~15% YoY with
market leaders Maruti, Hyundai growing ~30%, ~19% YoY, respectively,
in the domestic markets. Also, domestically, while the UV segment saw
~18% YoY volume growth, the domestic passenger car segment grew
~19% YoY. Overall, exports for the PV segment at ~53,000 units de-grew
~11% YoY with major growth contributed by Volkswagen Vento (~6200
units).
The utility vehicle (UV) segment has been outperforming the overall PV
market, especially the UV1 sub-segment, which has taken away share
form the UV2 segment. For August, the domestic UV2 segment was flat
YoY at ~15,100 units while the domestic UV1 segment grew ~32% to
~28,850 units led by growth in Hondas volumes as Mobilio was launched
this year.
The commercial vehicles segment continued to post negative growth.
However, the M&HCV segment has shown definitive signs of recovery &
grew 12% YoY after about three years of slowdown. LCV segment is still
in the negative growth terrain and de-grew ~11% YoY to ~36,000 units.

Market share movement

According to Siam, the domestic market share for passenger vehicles
(PV) and commercial vehicles (CV) in August 2014 has been as follows:
The market share for Maruti has approached its long-term

Exhibit 11: Domestic market share movement in passenger vehicles

share of 40% in the market with the addition of new diesel

capacity and outperformance of its petrol portfolio on the

20.9
20.2
18.6

Others

back of diesel-petrol price rationalisation

Aug-13

Jul-14

Aug-14

3.4
3.3
4.6

GM
M&M

9.2

11.3
10.9
13.2
12.6
12.3
14.6
14.5
14.9

Tata motors
Hyundai

36.6

Maruti
0

10

15

20(%)

25

30

35

38.6
40.3
40

Source: Siam, Data used is YTD * passenger vehicles as per Siam include Vans like Gio, Maxximo, Eeco, Ace

ICICI Securities Ltd. | Retail Equity Research

Page 7

45

Exhibit 12: Market share movement in A2 segment

The A2 segment is the bread and butter category of the

64.3

70

passenger car segment. The segment had seen a drop in

volumes owing to a lack of options among diesel variants.

60

As discretionary consumption spending increases, the

52.6

50

segment will see a definitive improvement in volumes

56.4

41.0

38.4

40

(%)

30.5

30
20
10

Hyundai

Jul-14

Aug-14

Jun-14

Apr-14

May-14

Feb-14

Mar-14

Jan-14

Dec-13

Nov-13

Oct-13

Sep-13

Jul-13

Aug-13

Jun-13

May-13

Apr-13

Feb-13

Mar-13

Jan-13

Dec-12

Oct-12

Nov-12

Sep-12

Aug-12

Maruti

Source: Siam, Top two PV OEMs considered

Despite a slowdown in the M&HCV segment, LCVs had

Exhibit 13: Domestic market share movement in commercial vehicles

continued to buck the trend and managed to grow.

However, in the past quarter, LCVs have also witnessed a

60

drop in volumes as the overall economic scenario has

shown little signs of improvement. Going ahead, with an
improvement

in

sentiment

and

pick-up

Aug-13

Jul-14

Aug-14

52.7
47.5 47.5

50

in

economic/industrial activity levels, we believe the CV

40
(%)

segment will pick up

30

25.4 25.4

22.4
20

12.3 12.8 13.3

12.5

14.3 13.8

10
0
ALL

M&M

Tata Motors

Others

Source: Siam Data used is YTD

The outperformance of the LCV segment in the past year,

Exhibit 14: Segmental share in CVs

coupled with a decline in the M&HCV segment has enabled

80

the LCV/MHCV ratio to quickly reach the 70:30 mark that is

the norm in most countries

70

70.0

62.764.9

60

(%)

50
40

37.335.1

30.0

30
20
10

M&HCV

LCV

Source: Siam

ICICI Securities Ltd. | Retail Equity Research

Page 8

Aug-14

Jul-14

Jun-14

Apr-14

May-14

Mar-14

Feb-14

Jan-14

Dec-13

Nov-13

Oct-13

Sep-13

Aug-13

Jul-13

Jun-13

May-13

Apr-13

Mar-13

Feb-13

Jan-13

Dec-12

Nov-12

Oct-12

Sep-12

Maruti Suzuki India (MARUTI)

Maruti Suzuki India: sales volumes

100

8.6

8.6

9.8

10

8.2

7.2

105
105
92
91
102
109
113
86
101
113
101
111

60

4.8

14
11.111.3
12
10.310.5

5.7

87

('000s)

80

40

16

13.9
12.9

(%)

120

6
4

20

Exhibit 15: Volume performance (in units)

Aug'14

Jun'14

Apr'14

Feb'14

Dec'13

Oct'13

Aug'13

Total Sales

Maruti Suzukis overall volumes have grown ~27% YoY and

~10% MoM. Domestic volumes have grown ~30% YoY (on the
low base of last year) and have significantly outperformed the
domestic PV segment, which has grown ~5% YoY
The A segment, viz. Alto, Wagon-R and Swift (including the Dzire
as per the new Siam classification) has grown ~34% YoY. Ertiga
has also seen strong growth in volumes for the month at ~5500
units, ~20% YoY increase
Exports grew sharply by ~27% YoY to ~12,500 units

Segment
M800*
Omni, Eeco,Versa

Export %

Source: Siam, ICICIdirect.com Research

Alto, Wagon-R, Zen,

Swift,Ritz, Celerio, Dzire
SX4, Swift Dzire Tour
Total Passengers
Gypsy, Vitara,Ertiga
Total Domestic
Exports
Total Sales
Exports as % of sales

Aug-14
0
9,990

81,445
1,378
92,813
5,491
98,304
12,472
110,776
11.3

Aug-13 %chg
1,522 -100.0
7,956 25.6

61,009
968
71,455
4,563
76,018
11,305
87,323
12.9

33.5
42.4
29.9
20.3
29.3
10.3
26.9

Jul-14
0
11,680

%chg
NA
-14.5

YTD'15
50,501

YTD'14
7,826
38,200

%chg
-100.0
32.2

53,915
18,867
84,462
5,631
90,093
11,287
101,380
11.1

51.1
-92.7
9.9
-2.5
9.1
10.5
9.3

310,435
71,715
432,651
26,389
459,040
53,010
512,050
10.4

259,520
67,216
372,762
23,747
396,509
40,547
437,056
9.3

19.6
6.7
16.1
11.1
15.8
30.7
17.2

Source: Company, Siam. * estimates

Tata Motors: Domestic sales volume

Tata Motors (TELCO)

40
20

For August, JLR volumes grew only 2.4% YoY to ~31,650 units
reflecting strong demand for its products across geographies

Segment
Domestic MHCV sales
Domestic LCV Sales
Domestic Pass.Car Sales
Domestic UV Sales
Exports
Total Sales
Jaguar Sales
Landrover Sales
Total JLR Sales

Aug-14
10,765
18,766
8,482
2,870
4,480
40,883
4,658
26,992
31,650

Aug-13
9,297
27,717
9,561
3,036
4,894
49,611
5,222
25,673
30,895

%chg
15.8
-32.3
-11.3
-5.5
-8.5
-17.6
-10.8
5.1
2.4

Jul-14
11,307
18,778
6,949
2,585
4,363
39,619
7,408
32,059
39,467

%chg
-4.8
-0.1
22.1
11.0
2.7
3.2
-37.1
-15.8
-19.8

YTD'15
52,647
91,554
34,587
11,886
19,070
190,674
31,650
154,623
186,273

YTD'14
53,319
140,115
48,190
12,604
20,606
254,251
30,973
125,704
156,677

Source: Company, Siam *JLR February data is as per estimates

Aug'13
Sep'13
Oct'13
Nov'13
Dec'13
Jan'14
Feb'14
Mar'14
Apr'14
May'14
Jun'14
Jul'14
Aug'14

60
55
50
45
40
35
30
25
20
15
10

(000's)

30.9
35.9
36.2
38.6
40.7
38.6
39.0
43.3
40.1
39.0
36.0
39.5
31.7

100
(% share of total volumes)

For Tata Motors, the domestic CV segment declined ~20% YoY,

even after echoing the poor demand scenario. The PV segment
has also been struggling and saw a decline of ~10% YoY.
However, the M&HCV segment grew ~16% indicating the
bottoming of demand after nearly three years of downturn

Exhibit 16: Volume performance (in units)

Jaguar Land Rover sales volume

60

PV Sales

Source: Company, ICICIdirect.com Research

80

Tata Motors volumes continued to remain under pressure with

total sales of 40,883 units, a decline of ~18% YoY but an MoM
increase of ~2%

37.5
Aug'14

Jun'14

Apr'14

Feb'14

Dec'13

Oct'13

Aug'13

CV Sales

11.4

9.5
38.3

37.5

9.3
28.2

26.1

7.8

8.4

13.1
11.4

11.8

29.1

28.2

38.1

9.5
28.4

14.7
10.7
37.0

10

30.1

20

37.0

30
37.0

(000's)

40

12.6

50

13.4

60

% Jaguar

% LR

JLR total volumes(RHS)

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd. | Retail Equity Research

Page 9

%chg
-1.3
-34.7
-28.2
-5.7
-7.5
-25.0
2.2
23.0
18.9

Mahindra and Mahindra (MAHMAH)

M&Ms volumes have underperformed the overall industry. Its

core UV segment declined ~12% YoY while the overall UV
segment (including exports) has grown ~22% YoY. However, exMobilio, the segment is up ~4% YoY, thus indicating the need for
faster launch of new models for the segment

Old warhorses Bolero and Scorpio (together contributing over

10,000 units) continued to drive the bulk of volumes for M&M even
as newer products have struggled to maintain their expected run
rates. The Verito family has seen a continued slump in volumes
despite the launch of Verito Vibe. Automotive exports saw a
decline of ~26% YoY

The farm equipment segment has been doing well for M&M in the
past year. However, fears of lower than average monsoons are
likely to have dented domestic volumes, which have remained flat
for the month at ~13,700 units. Tractor exports, however, have
improved and increased 107.3% YoY, ~24% MoM to 1028 units

35.2

38.5

35

35.6

37.9

36.3

42.7

42.2

39.3

40

37.9

(000's)

45

43.3

50

39.6

50.6

55

51.6

Mahindra and Mahindra: Sales volume

30
25
20
Aug'13
Sep'13
Oct'13
Nov'13
Dec'13
Jan'14
Feb'14
Mar'14
Apr'14
May'14
Jun'14
Jul'14
Aug'14

15

Source: SIAM, ICICIdirect.com Research

38.3

Mahindra and Mahindra: Tractor sales

35

2,030
35,175

15.0

17.0

17.4

23.1

14.2

23.9

33,145

15

20.7

Total Domestic Auto Sales

20

17.7

25

17.6

Aug-13
15,821
13,718
471
955
30,010
5,149

20.1

Aug-14
13,870
12,975
597
270
27,712
5,433

26.6

Segment
UVs
4-Wheeler pickups
M & HCV
Verito+Verito Vibe
Total 4wheeler Sales
3-Wheeler

30
(000's)

Exhibit 17: Volume performance (in units)

29.9

40

Aug'14

Jul'14

Jun'14

May'14

Apr'14

Mar'14

Feb'14

Jan'14

Dec'13

Oct'13

Nov'13

Sep'13

Aug'13

10

Exports
Total Auto Sales
Exports as % of sales

Source: SIAM, ICICIdirect.com Research

M&HCV

Source: Siam, ICICIdirect.com Research

LCV

0.3

172,255

187,862

-8.3

2,520

-19.4

11,101

10,115

9.7

-7.2

35,567

-1.1

183,356

197,977

-7.4

-5.7

2,738

-25.9

37,897
7.2

6.1

5.1

13,543

1.4

16,379

-16.2

102,032

102,704

-0.7

- Exports
Total Tractors
Exports as % of sales
Source: Company, Siam

1,273
15,006
8.5

615 107.0
14,158
6.0
4.3

1,028
17,407
5.9

23.8
-13.8

4,936
106,968
4.6

4,500
107,204
4.2

9.7
-0.2

7.1

Ashok Leylands (ALL) overall volumes have grown handsomely

by ~16% YoY. The M&HCV segment continued to show an
improvement in volumes (~2% MoM growth, ~18% YoY) while
the LCV segment saw volumes at ~2450 units, up ~11% YoY

The M&HCV goods segment saw ~37% YoY growth while the
M&HCV passenger segment witnessed a decline of ~8% YoY.
Exports have seen strong volume offtake and grew ~75% YoY to
~1000 units

2.5

2.1
5.7
Jul'14

Aug'14

Jun'14

May'14

Apr'14

Mar'14

Feb'14

Jan'14

Dec'13

Oct'13

Nov'13

Sep'13

0
Aug'13

33,047

35,159

5.8

5.8

1.9
5.5

4.9

4.5

7.7

5.5

1.7

1.3

2.3

2.2
5.5

2.3

2.5
4.1

2.7

3.9

2.5
4.7

2.3

2.2
4.9

8
(000's)

%chg
-12.1
-9.1
3.0
-68.8
-9.6
1.7

13,733

2.5

10

YTD'14
91,575
70,481
3,800
4,343
165,856
22,006

Tractors - Domestic

12

YTD'15
80,508
64,098
3,913
1,353
149,872
22,383

Jul-14
14,420
12,472
725
288
27,905
5,142

Ashok Leyland (ASHLEY)

Ashok Leyland: Total sales

%chg
-3.8
4.0
-17.7
-6.3
-0.7
5.7

%chg
-12.3
-5.4
26.8
-71.7
-7.7
5.5

Exhibit 18: Volume performance (in units)

Segment
M&HCV Passenger
M&HCV Goods
LCV
Passenger Vehicles
Total Sales
Exports
Exports as % of sales
Source: Company, Siam

ICICI Securities Ltd. | Retail Equity Research

Aug-14
1,869
3,966

Aug-13
2,037
2,902

2,451
50
8,336
1,010
12.1

2,200
0
7,139
577
8.1

%chg
-8.2
36.7
11.4
NA
16.8
75.0

Jul-14
1,547
4,159

%chg
20.8
-4.6

2,061
50
7,817
884
11.3

18.9
0.0
6.6
14.3

YTD'15
7,367
19,123
9,475
169
36,134
4,431
12.3

YTD'14
10,158
15,907
11,504
37,569
3,615
9.6

Page 10

%chg
-27.5
20.2
-17.6
NA
-3.8
22.6

News & views

Maruti Suzuki opened bookings for the upcoming Ciaz sedan on
September 5. Since then, it has already received 3,000 orders and 10,000
inquiries. With an expected launch in the first week of October, the Ciaz
will be available in both petrol and diesel engine options. Maruti Suzuki
has claimed that the Ciaz will be the most fuel efficient sedan in the
country. While the petrol variant would give a mileage of 20.7 kmpl, the
diesel variant mileage is expected to be 26.2 kmpl
Bajaj Auto has launched the KTM RC series of super sports motorcycles
RSC 390 and RC 200. The bikes have been launched at introductory prices
of | 1.60 lakh for RC 200 and | 2.05 lakh for RC 390 (ex-showroom, Delhi)

Hero MotoCorp plans to invest | 1,600 crore to set up a new

manufacturing plant in southern India. As per sources, Hero MotoCorp has

signed a preliminary agreement with the Andhra Pradesh government to
set up the plant, spread across 600 acres, which can produce up to 1.8
million vehicles annually.

ICICI Securities Ltd. | Retail Equity Research

Page 11

ICICIdirect.com Research Universe (Auto & Auto ancillary)

CMP
M Cap
(|)
TP(|) Rating
(| Cr)
Sector / Company
636
590 Hold
10,855
Amara Raja (AMARAJ)
211
270 Buy
10,619
Apollo Tyre (APOTYR)
42
32 Hold
11,922
Ashok Leyland (ASHLEY)
2,334 2,400 Buy
67,551
Bajaj Auto (BAAUTO)
792
870 Buy
7,657
Balkrishna Ind. (BALIND)
14,963 15,450 Hold
46,984
Bosch (MICO)
12,175 13,000 Buy
32,884
Eicher Motors (EICMOT)`
157
103
Sell
1,867
Escorts (ESCORT)*
178
148 Hold
15,139
Exide Industries (EXIIND)
2,809 2,600 Hold
56,093
Hero Mototcorp (HERHON)
390
477 Buy
1,599
JK Tyre & Ind (JKIND)
1,364 1,322 Hold
80,537
M&M (MAHMAH)
210
175 Buy
6,833
Mahindra CIE (MAHAUT)*
2,974 2,450 Hold
89,874
Maruti Suzuki (MARUTI)
437
360 Hold
38,539
Motherson (MOTSUM)
508
560 Buy 157,021
Tata Motors (TELCO)
3,850 3,700 Hold
7,315
Wabco India (WABTVS)
Source: ICICIdirect.com Research *Year ending September

FY14E
21.5
20.0
0.1
112.1
50.5
281.8
145.9
20.5
5.7
105.6
58.0
56.5
1.5
92.1
8.7
43.3
62.0

ICICI Securities Ltd. | Retail Equity Research

EPS (|)
FY15E
25.4
21.8
0.2
124.1
54.8
366.3
262.9
11.9
7.9
136.4
85.4
67.8
6.4
105.1
14.6
61.6
79.2

P/E (x)
EV/EBITDA (x)
RoCE (%)
RoE (%)
FY16E FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E
33.7 29.5 25.0 18.8 15.6 12.1
9.0 34.3 33.1 33.9 27.0 25.3 26.1
24.5 10.6
9.7
8.6
6.3
6.0
5.4 23.7 20.2 19.1 22.0 19.6 18.2
1.5 381.8 180.1 28.9 84.5 19.7 10.6
NM
2.7
8.7
0.7
1.3
7.6
153.3 20.8 18.8 15.2 12.8 11.4
8.8 40.6 37.8 40.1 33.8 32.2 33.5
67.0 15.4 14.2 11.6 11.0
9.1
7.1 17.2 17.1 19.7 25.9 17.2 17.1
492.2 48.6 37.4 27.9 31.4 25.2 18.4 14.1 16.0 18.2 14.1 15.8 19.5
384.0 83.4 46.3 31.7 46.1 21.7 14.3 18.3 25.1 29.7 19.2 26.9 29.5
17.1
5.7
9.9
6.8
4.1
5.9
4.4 13.7
8.3 10.7 13.4
7.3
9.7
9.5 31.1 22.5 18.7 16.0 12.3 10.2 18.5 22.3 23.2 13.1 16.1 17.1
173.3 26.6 20.6 16.2 13.0 14.6 13.5 43.4 49.2 53.6 37.7 40.8 43.0
109.4
6.7
4.6
3.6
4.3
4.0
3.4 19.2 20.0 21.8 24.0 25.9 25.4
72.7 24.1 20.1 18.8 15.5 12.3 11.0 18.5 20.4 19.8 22.1 20.2 18.6
10.1 144.7 32.7 20.8 14.0 10.1
8.0
2.0
8.2 12.6
4.7
8.0 11.7
144.1 32.3 28.3 20.6 13.4 11.8
8.8 13.3 13.5 16.9 13.3 13.4 15.9
22.2 50.3 29.8 19.7 12.6
9.3
6.9 24.2 32.1 36.4 25.9 36.5 40.3
73.5 10.3
7.3
6.1
4.6
4.0
3.4 21.7 23.2 23.2 21.3 23.7 22.5
137.0 62.1 48.6 28.1 36.4 27.0 16.8 15.6 16.9 23.0 17.7 20.7 27.6

Page 12

Exhibit 19: Auto raw material index

The in-house raw material index reflects the combination of

240

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

210

220

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

The chart shows a declining trend in raw material prices,

200

which is a positive for the industry.

190

180
160
140
120
100

Jul-14

Feb-14

Sep-13

Apr-13

Nov-12

Jun-12

Jan-12

Aug-11

Mar-11

Oct-10

May-10

Dec-09

Jul-09

Feb-09

80

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

Exhibit 20: Currency movements

Volatility in the currency markets is impacting raw material prices for companies with
imported components and lower natural hedges.

160
150
140
130
120
110
100
90

US$INR

US$JPY

Jun-14

Mar-14

Dec-13

Sep-13

Jun-13

Mar-13

Dec-12

Sep-12

Jun-12

Mar-12

Dec-11

Sep-11

Jun-11

80

US$EUR

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd. | Retail Equity Research

Page 13

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 500

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 400 093
research@icicidirect.com
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Page 14