Ventura has come out with its report on auto sector. According to the research firm, changing competitive landscape in the auto sector would be one of the key determinants of stock performance over the coming months.
Festive season sales disappoint!
Diwali sales did not bring that much of a cheer this time around. Sales were below par for most car manufacturers, although stalwarts like Maruti and Mahindra made the most of available opportunities. In the commercial vehicle segment, medium and heavy commercial vehicle (M&HCV) sales remained weak, with Tata Motors reporting a decline. Two wheeler sales decreased more sharply in comparison to the last two months, with Hero MotoCorp, Bajaj Auto and TVS registering a drop. Amongst individual players Maruti Suzuki India Ltd and Mahindra & Mahindra witnessed growth of 12.5% and 18.2 % in their domestic dispatches, while Tata Motors registered a decline of 13.4% over the same period of Nov’12. Within the two wheeler universe, Hero MotoCorp reported a de-growth of 6.4% yoy in sales whereas sales of Bajaj Auto and TVS Motors were lower by 0.6% yoy and 2.1% yoy respectively.
Outlook- Positive expectations: In the light of the recent reform initiatives undertaken by the government coupled with expected reduction in interest rates, we believe the volumes will pick up over the next few months. M&HCV demand would continue to be under pressure due to the on going economic slowdown and mining ban in some states. Another addressable outlook is the changing competitive landscape in the auto sector would be one of the key determinants of stock performance over the coming months.
Maruti Suzuki India- Growth slightly lower than expected growth: Maruti Suzuki witnessed a volume growth of 12% YoY (flat MoM) to 103,200 for the month of Nov'12. Wholesale volumes disappointed despite ramp-up at Manesar, as focus was to manage inventory resulting in measured wholesale deliveries, as well as lesser working days (4 lesser working days than Oct-12). While domestic volumes grew 10% YoY (-5% MoM), exports grew 38% YoY (+73% MoM). This was driven by Manesar ramp-up, the new Alto launch & festive demand pick-up. Average production from the Manesar plant has normalized to ~1,700 units/day. Maruti's Mini & Compact segment reported flat YoY (-6% MoM) due to slower rampup in petrol variant of Swift (and Dzire). Whereas, the company's recently launched new Alto witnessed good sales of over 24,000 units during Nov-12. Ertiga's momentum continues to remain strong at ~7,300 units. However, the C segment volumes declined 10% YoY (-2% MoM), due to competition from diesel variants. Exports grew 73% MoM to 12,318, driven by higher A-star & Dzire production with ramp-up at Manesar plant.
Mahindra & Mahindra- Sustained its strong volume performance: M&M reported another strong month of sales growth wherein its total auto volumes (including MNAL) grew by a healthy 18.2% yoy. However, the volumes were down 9.9% mom in light of moderation of dealer inventories post the festive season. The relative outperformance to the market continues, led by auto volumes in the domestic market which recorded a healthy growth of 23.6% yoy. The passenger UV segment grew by 38% (32% YTD), while the growth in pick-up segment moderated to 7% (17% YTD). UVs (incl. pick-ups) volumes grew 20% YoY (-12% MoM) to 38,995 over the month of Nov'12. Aided by the festive season, Mahindra’s tractors sales witnessed a growth of 17% YoY (-31% MoM, due to seasonality) to 20,476 units. We believe recovery in tractors sales to continue backed by the favourable base and prospects of healthy rabi crop.
Tata Motors- Tata Motors’ total commercial vehicle sales in the domestic market were almost flat (-0.9% yoy), wherein the growth recorded in LCV segment was completely negated by the decline in MHCV volumes. The M&HCV volumes at 9,495 units (lowest since May 2009) recorded a sharp fall of 40.9% yoy vis-a-vis a growth of 21.5% yoy noted in the LCV category. The sequential pickup in volumes of M&HCV observed in September 2012 did not sustain and the volumes continued to skid mom. The car segment sales volumes did not bring any positive surprises and continued to exhibit the weak performance with a contraction of 39.8% yoy. The volumes for Nano contracted by 45.3% yoy, and declines of 40.3% and 36.3% yoy were seen in Indigo and Indica sales volumes respectively. Total domestic volumes declined by 13.1% yoy and exports witnessed a drop of 4.7% yoy leading to the total units sold being down by a disappointing 12.6% yoy.
Ashok Leyland- Poor performance on M&HCV front: During the month of November, total sales of Ashok Leyland stood at 7,370 units, registering a declined of 6.41% YoY. However, on monthly basis, sales decreased by 7.84%. M&HCV declined by 36.45% yoy to 4,487 units as weak economic growth impacted freight volumes and transporter’s profitability. Ashok Leyland volumes have been relatively better than Tata Motor's in the past few quarters, driven by recovery in its key southern market. However, the management has guided total volume growth of ~30% to ~132,000 units for FY13, led by ramp-up of Dost volumes to 36,000 units, 2-3% growth in its domestic M&HCV volumes and export volumes of ~10,000 units. It expects production from Pantnagar plant at ~40,000 units in FY13.
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