Motilal Oswal has come out with its report on automobiles. According to the research firm, two-wheeler volumes are expected to recover in FY14 on better macro-economic environment, though over the near term expect them to remain weak. One can prefer Hero Motocorp over Bajaj Auto, says the research firm.
Motilal Oswal has come out with its report on automobiles. According to the research firm, two-wheeler volumes are expected to recover in FY14 on better macro-economic environment, though over the near term expect them to remain weak. One can prefer Hero Motocorp over Bajaj Auto , says the research firm.
Demand weak since mid Dec-12; aggravates further in Feb-13
Our survey indicates continued weakness in retail demand for Feb-13, with 52% of dealers (60% of Hero, 68% of TVS ) indicating lower MoM sales. HMSI dealers though expect Feb-13 sales to be higher MoM led by launch of upgraded scooter variants offering higher mileage and higher promotional spends by the company.
Sales may improve MoM in March, but decline YoY
Around 56% of dealers expect YoY decline in March sales across major players, HMSI being the only exception. However, on a MoM basis, 40% dealers expect March to be better than February (due to seasonality).
Channel inventory at 5-6 weeks for Hero, Bajaj
OEMs support dealers with higher credit limit; offer attractive finance schemes
Valuation & view: Expect demand recovery in FY14
For Bajaj, we expect 13% volume CAGR in domestic motorcycles over FY13-15E, with new launches and industry recovery. This coupled with an
"Despite factoring market share loss, we expect Hero to report 11% domestic volume CAGR over FY13-15E. Expect export volumes to ramp up to 0.5m units by FY15E. We expect Hero to report 13.3% overall volume CAGR. Expiry of royalty payments, post June 2014, would drive EPS CAGR of 23% over FY13-15E. We prefer Hero over Bajaj on valuation," says Motilal Oswal research eport.
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