Auto sales scorecard for January 2013: FinQuest Securities

Passenger Vehicles: The shift from passenger cars to UVs continues

Inspite of the sluggish  passenger car market, Maruti Suzuki (MSIL) has been consistently doing well over the past few months on the back of production stabilization and the continued demand for its Swift hatchback and notchbacks, Ertiga MPV and the new Alto 800. Some pockets of weakness were in the Ritz & Eeco models. M&M has continued its outstanding run as it posted a robust 33% Y-o-Y growth in passenger vehicle sales on the back of robust demand for its Bolero, XUV 5OO, Quanto mini SUV and the Scoprio SUV. Tata Motors (TML) has been struggling in the passenger car business while the demand for SUVs in the market coupled with its newly launched Safari Storme has brought in some incremental volumes for TML. The newly launched D90 variant of the Vista hatchback could drive some volumes.

+Ve for M&M, Maruti, -Ve for TML

Commercial Vehicles: Small Commercial Vehicles (SCV) post modest growth but MHCVs continue to disappoint

Lower cargo offerings, truck rentals, slow down in manufacturing sector has lead to a drop in sale of new trucks. The continuous usage of old trucks in the freight market has resulted in truckers not able to dissolve their existing old fleet. These factors have resulted in the continued slowdown in the MHCV segment. All top players suffered including TML (down 52% Y-o-Y), ALL (down 25% Y-o-Y), Eicher Motors (VECV) (down 2% Y-o-Y) and M&M (down 34% Y-o-Y). However, there is some positive news for the CV market, the open market truck rentals in Feb'13 were up by 2.5-3% M-o-M on the back of higher cargo flow from manufacturing sector and arrival of fresh vegetables and fruits. On the other hand, the planned increase in diesel prices may well have an entirely unexpected fallout, as it could encourage the sale of newer, more fuel efficient trucks.

Sales of small and light commercial vehicles which are the non-cyclical part of the CV business were still robust. This was because the segment is characterized by individual purchases and not large fleets. The small and light commercial vehicles segment grew 15% in FY13. TML did well in this space, driven by its SCVs Magic Iris and Ace Zip while M&M's 4W pick-ups also grew 5% Y-o-Y. ALL's LCV volumes posted stellar growth of grew by 79% M-o-M.

-Ve for TML, ALL +Ve M&M, VECV

Two-wheelers: Scooters continue to do well but motorcycles still sluggish

Hero Motocorp 's (HMC) increased focus on the 110-125cc category has started to bear fruit as volumes grew 7% Y-o-Y. HMC also benefited from the robust growth from the scooters segment where Bajaj Auto (BAL) isn't present. BAL had a mediocre month as domestic sales declined 1% Y-o-Y but it made up for the short fall by posting a 10% Y-o-Y growth on the export front. Jan'13 was the first month when BAL started shipments of its Discover 100T motorcycle and we believe it should gain traction in the coming months.

Both TVS and BAL performed exceedingly well on the 3W front with volumes going up by 87% and 7% respectively on the back of new permits issued in a few states and also robust demand from exports.

+Ve for HMC, BAL, -Ve TVS

Farm Equipment (FES): FES sales yet to bottom out

The weak Kharif output and concerns over the delayed sowing of rabi crop have dampened the tractor sales. M&M being the market leader was also impacted as domestic volumes declined 9% Y-o-Y to 16,402 units.

-Ve for M&M

Outlook: In the passenger car segment, passenger car volumes have been subdued but the craze for UVs continues. M&M has been the main gainer
from this spurt. We believe the cars with diesel engines would continue to drive the sales while MPVs and mini/full blown SUVs would continue
to gain at the expense of passenger cars. However the recent news about hiking diesel prices by Rs 10 in the next 1 year could take away some
sheen from diesel cars and increase the demand for petrol cars with MSIL being the key beneficiary from this move.

On the CV front, the lackluster economic activity, coupled with higher second hand truck inventory in the market has led to a sluggish CV market.
However, there is some positive news for the CV market as the open market truck rentals in Feb'13 were up by 2.5-3% M-o-M on the back of higher
cargo flow from manufacturing sector and arrival of fresh vegetables and fruits. On the LCV/SCV front, all players have done well in Jan'13 as TML,
ALL & M&M posted growth of 24% Y-o-Y, 236% Y-o-Y & 5% Y-o-Y respectively.

For 2W makers, the performance was mixed with HMC witnessing good growth from both scooters and motorcycles, mainly in the 110-125cc
executive commuter segment. BAL having no scooter model suffered with domestic sales down 1% Y-o-Y. We expect BAL to gain traction once the
volumes of the newly launched Discover 100T picks up.

Our Picks
BAL's volumes have started to recover after a spate of sluggish numbers over the past few months. We continue to be bullish on the stock mainly
on account of its superior technology of its vehicles at a particular price point coupled with faster churning of models by the company. The new
models viz. the executive commuter (Discover 125ST) and premium category (KTM Duke 200 & new Pulsar 200NS) can be called as the
benchmarks in those categories. We also expect the new 100cc motorcycle "Discover 100T" to do well due to its advanced technology. We are
also very bullish on the new Duke 390 and the new bigger Pulsar 370 that is expected to be launched in FY14. We reiterate our "BUY" rating on
BAL with a price target Rs 2,407.

TML's domestic performance has not been good off-late mainly due to sluggish CV market while even the passenger car market has done badly.
Even though TML has been doing reasonably well in the UV segment volumes are quite low to make any significant impact on the overall
performance. However the continued strength in JLR's volumes with many new models such as the all-new Range Rover, the AWD Jaguar XJ and
XF models are expected to drive volumes going ahead. JLR volumes have started to improve off-late and if the current trend continues we may
revise the target price upwards from our earlier Rs 370," says FinQuest Securities research report.

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