Chennai rains to hit Dec output of auto cos: P Lilladher

Rohan Korde - auto analyst at domestic brokerage firm, Prabhudas Lilladher, says incessant rains in Chennai will affect the December performance of most auto companies. The sales growth, however, would resume from January 2016, he says in an interview to CNBC TV-18.

In the two-wheeler space, Rohan is optimistic on Bajaj Auto despite the recent weakness in its export performance. They should be able to improve presence in domestic market, he adds.

Rohan would prefer four wheelers better though and is positive on Maruti Suzuki and Tata Motors.Below is the verbatim transcript of Rohan Korde’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Sonia: What kind of trend do you expect to see in December and January in auto sales given what we have seen in the month of November?A: In the month of November the sales were decent. There were not too disappointing but nothing exciting especially after the increased dispatches that we saw in October. So, December should be a subdued month as well especially with some loss of production coming in from Chennai and other south based original equipment manufacturer (OEM).However, January should be good and should be seeing a decent performance in January from most of the four-wheeler companies. Of course some segments like medium & heavy commercial vehicle (M&HCV) are operating on higher base. So the growth rate will not be similar to what we had seen in the first half. However, it should still be to extent of 15 percent for M&HCV.Light commercial vehicle (LCV) should be hovering in the single digit mark. Four-wheelers, that is passenger vehicle segment, we should be seeing about 10 percent growth in January. Two-wheelers I guess will be a bit subdued even in the fourth quarter and expect two-wheeler sales will be better only in FY17.Latha: What would be your pick of the pack in two-wheeler space because things were mellow? Anything you will buy at all?A: I would still stay with Bajaj Auto in the two-wheeler pack while their performance in the past couple of months especially on the export side has been subdued. I do believe that they will be able to perform better in FY17 and also in the fourth quarter so we can see some growth coming in fourth quarter on exports as well.We have to look at the domestic performance which was very good for them in the month of November albeit on a lower base.Sonia: What kind of a target price would you have with a 12 month horizon on Bajaj Auto and on the export front we continue to see a lot of damage on the numbers. When do you expect exports to resume to growth?A: My target price on Bajaj Auto is Rs 2,622. I believe that fourth quarter should be seeing growth in exports simply because of the lower base. As we see a ramp-up coming on Qute and as we move into FY17 we can see a steady growth in export will not be mirroring the growth that we had seen in the previous year particularly up to 2012 but we should see decent growth in exports complemented by decent growth and domestic sales as well for Bajaj.Latha: Anything in the four-wheelers space that you like?A: Overall I would prefer to be in the four-wheeler space as compared to the two-wheeler space. So, I like Maruti Suzuki, Tata Motors. Maruti will continue its strong performance. We have already seeing great coming in from in the first half. Of course the November was a lower than expectation but 9.7 percent growth by no means was bad number so it was a good performance and I do expect the same trajectory to continue.My residual growth expectation for the rest of the year is also close to 10 percent. So, I think expectations are not set very high for Maruti. We should be seeing for the positives like the 7th pay commission and some recovery in the economy also coming in, plus continuation of the new model launches should mean that Maruti should continue to post about 14-15 percent growth in FY17 as well.Sonia: You said you like Tata Motors as well. It resumed its uptrend got back to Rs 400 but then got stuck around those levels. Do you think that worst as far as the Jaguar Land Rover (JLR) slowdown in China is behind us or do you think that there could be another couple of quarters of volatility?A: The worst is behind us. In the second quarter we had all the negatives coming in together including lower sales in China and loss of inventory for which they have to take an exceptional loss. However, the other markets are really doing well for them.We are seeing a steady month-on-month growth in China and hopefully November will also see a somewhat continuation of that trend. North American sales have been good and the other geographies are also doing well. So, I think we should be seeing an improved performance in second half from jaguar-LandRover (JLR) and FY17 should be better. So we should be seeing a steady move from Tata Motors over the next one and a half years.