Monthly auto sales update for February 2013: Motilal Oswal
Motilal Oswal has come out with its report on monthly auto sales update for February 2013. The research firm believes that, worst of competitive pressure is behind for passenger cars, increasing competitive intensity for both 2W, UVs and CVs pose challenge to incumbent OEMs. One can prefer Tata Motors and Maruti Suzuki, says Motilal Oswal.
March 05, 2013 / 12:36 IST
Motilal Oswal has come out with its report on monthly auto sales update for February 2013. The research firm believes that, worst of competitive pressure is behind for passenger cars, increasing competitive intensity for both 2W, UVs and CVs pose challenge to incumbent OEMs. One can prefer Tata Motors and Maruti Suzuki, says Motilal Oswal.
"Retail demand is estimated to have declined on a YoY basis for two-wheeler and passenger vehicle companies. Channel inventory filling over the last couple of months have supported two-wheeler sales to an extent. M&HCVs sales continue to remain under pressure due to weak economic activity. Our channel interaction suggest that Tata Motors and Ashok Leyland have implemented a price hike and meaningful reduction in discounts in 4QFY13. While growth in LCVs remained healthy, signs of moderation are now visible. Tractor sales have declined on a lower base (production cut last year). Expected softening in interest rates and reform driven improvement in macro environment and consumer sentiment, coupled with long term drivers remaining intact are key drivers for volumes over next few years.EBITDA margins for our auto coverage universe is expected to improve on higher volumes, better mix (BJAUT, Hero, MSIL, M&M), favourable Fx (depreciating JPY against USD - Hero, MSIL) together with stable RM cost. However, demand slowdown and higher competitive intensity would impact the performance of CV companies (TTMT S/A, ALL). Eicher Motor’s CV performance, however, is expected to improve with higher QoQ volumes. Moreover, its consolidated performance will benefit from robust Royal Enfield operations.Over the last few months, lending rates by major auto financiers have been reduced. This augurs well for the auto industry, particularly for PV and CV demand. Moreover, with expected monetary easing by RBI, economic activity and consumer sentiments are expected to improve. Price increases and softening in commodity prices would be an added advantage for auto companies’ profitability. Thus, easing macro headwinds would be the key driver of volume growth, profitability and in-turn for re-rating.Valuation and view: Changing competitive landscape in the auto sector would be one of the key determinants of stock performance. While we believe that worst of competitive pressure is behind for passenger cars, increasing competitive intensity for both 2W, UVs and CVs pose challenge to incumbent OEMs. We prefer Tata Motors and Maruti Suzuki. Within mid-caps, we like Eicher Motors and Ashok Leyland," says Motilal Oswal research eport.Also Read: Emkay's pan-India dealer survey reflects bleak auto outlookDisclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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