Buoyant volumes on pre-budget buying: Angel Broking

Angel Broking has come out with its report on Automobile sector.

Automakers extended their robust performance into February 2011 as well with domestic demand remaining buoyant on the back of positive consumer sentiment. Pre-budget buying to avoid the likely increase of excise duty in the Union Budget 2011-12 was also partially responsible for the strong performance during the month. Among the majors, Mahindra & Mahindra (M&M), Hero Honda (HH) and TVS Motor (TVS) reported better-than-expected volumes for February. Overall, growth momentum in sales was maintained. Going ahead, however, the recent product price, increase in the fuel price along with higher interest rates would be some of the headwinds that could impact performance of the players.

Tata Motors (TML) reported 11.7% yoy growth (2.8% mom) in volumes in February 2011, led by the 16.3% yoy growth (5% mom) in passenger vehicles (PV) and modest 8.6% yoy growth (1.3% mom) in the commercial vehicles (CV) segments. In the PV segment, the company reported total off-take of 32,169 units, driven by the 101.3% yoy (23.3% mom) increase in Nano volumes and 21.6% yoy (6% mom) increase in Indigo volumes. In the CV space, total volumes stood at 45,374 units, with the M&HCV and LCV segments registering 3.8% and 12.4% yoy growth, respectively.

Maruti Suzuki (Maruti) reported robust and in-line sales for February 2011, clocking volume growth of 15.5% yoy (1.7% mom) to 111,645 units, led by strong momentum in the domestic markets. During the month, domestic volumes increased 19.8% yoy (1.1% mom) to 101,543 units. Exports, on the other hand, continued the downward trend, posting 15% yoy decline to 10,102 units. Maruti maintained strong volume momentum in the A2, A3 and C segments, posting 19.4%, 27.0% and 26.9% yoy growth respectively, in February 2011. During the month, the company also launched Kizashi, a luxury sedan in the A4 segment.

M&M registered strong volume growth of 25.4% yoy (down 8.4% mom) to 52,419 units in February 2011, aided by the robust 36.8% yoy growth in tractor sales (19,041 units) and 19.7% yoy growth in automotive sales (33,378 units). Within the automotive segment, the four-wheeler pick-up segment grew 13.4% yoy on the back of strong performance by GIO and Maxximo. Logan sales continued its upward momentum, registering 114.3% yoy growth. The three-wheeler segment registered 57.2% yoy growth. Tractors reported a strong 38% yoy (down 6.7% mom) increase in domestic sales volumes to 18,134 units, while exports volumes increased 16.3% yoy.

Two- and three-wheelers:Bajaj Auto (BAL) reported 21.7% yoy growth (4.2% mom) in line with our estimates, with motorcycle sales registering a growth of 22.2% yoy and three-wheeler sales posting better-than-expected 18.4% yoy growth on the back of easing capacity constraints. Hero Honda registered a slightly better-than-expected 23.5% yoy growth (1.2% mom) in sales to 472,055 units, led by a refreshed product range and new vehicle launches. TVS Motor reported marginally better-than-expected 24.3% yoy sales growth (7.4% mom) led by an impressive 49.3% yoy growth in scooter sales and 22.5% yoy growth in moped sales.

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