SECTOR UPDATE

02 SEP 2016

Autos
CVs struggle; 2Ws and PVs outshine
TP Revision
Company

TP

Tata Motors

625

Change

Sneha Prashant
sneha.prashant@hdfcsec.com
+91-22-6171-7336
Abhishek Kumar Jain
abhishekkumar.jain@hdfcsec.com
+91-22-6171-7324
Navin Matta
navin.matta@hdfcsec.com
Rupin
Shah
+91-22-6171-7322
rupin.shah@hdfcsec.com
+91-22-6171-7337

Reco
BUY

Auto sales for Aug-16 have been positive with 2Ws

and PVs showing double digit growth YoY. Rural
demand revival and early festive season inventory
build-up aided healthy growth in scooters and
motorcycles. Honda was the only company to post a
negative growth in the PV segment. TTMT posted

sharp growth led by strong Tiago numbers. CV

volumes were dismal for the third consecutive
month led by postponement of fleet replacement &
expansion and higher base last year. VECV reported
strong growth of 14% YoY. Retain Tata Motors, HMCL
and Maruti Suzuki as our top picks.

PV: Strong growth

MSIL reported strong growth led by robust volumes
from Brezza, Baleno and Ciaz. However, entry level
segment faces pressure from new players.
Tata Motors (Tiago) and Toyota, were the
outperformers.
Rural demand picks up and good festive season
could drive strong demand in the coming months.

Domestic PV Sales For Major Players

2W: Early festive season inventory build-up spurts

growth
2W players reported robust sales growth driven by
inventory built up in anticipation of a good festive
season and improving rural sentiments.
Rural demand revival, new launches in festive
season, implementation of 7th pay commision and
positive impact of recent launches to drive steady
growth.
CV: Weakness persists
Higher base last year led to key CV players in the
MHCV sub-segment reporting de-growth. LCVs
showed a muted trend owing to postponement of
replacement demand.
However, we expect MHCV demand to pick up in 4Q
with revival in construction activities scrappage
implementation and BS IV related pre-buying.

Domestic 2W Sales For Major Players

Company
Maruti Suzuki
Hyundai
M&M
Honda
Tata Motors
Toyota
Total

Aug-16 Aug-15
119,931 106,781
43,201
40,505
18,246
14,198
13,941
15,655
13,002
11,194
12,801
11,047
221,122 199,380

Company

% YoY
Jul-16
12.3% 125,764
6.7%
41,201
28.5%
17,356
-10.9%
14,033
16.2%
13,547
15.9%
12,404
10.9% 224,305

% MoM
-4.6%
4.9%
5.1%
-0.7%
-4.0%
3.2%
-1.4%

Aug-16

Aug-15

% YoY

Hero Moto*

616,424

480,537

28.3%

532,113

HMSI

466,342

373,202

25.0%

429,527

8.6%

TVS Motor

238,984

183,653

30.1%

206,605

15.7%

Bajaj Auto*

200,314

160,307

25.0%

198,022

1.2%

55,721

42,360

31.5%

53,378

4.4%

27.2% 1,419,645

11.1%

Royal Enfield
Total

1,577,785 1,240,059

Jul-16 % MoM
15.8%

Domestic CV Sales For Major Players

Company

Aug-16

Aug-15

% YoY

Jul-16

% MoM

Tata Motors

23,464

24,284

-3.4%

24,242

-3.2%

Ashok Leyland #

10,897

11,544

-5.6%

10,492

3.9%

Eicher Motors #

4,100

3,611

13.5%

4,315

-5.0%

38,461

39,439

-2.5%

39,049

-1.5%

Total

Source: Companies, HDFC sec Inst Research. * Hero/Bajaj sales include exports/3W volumes respectively. # AL and Eicher sales include export volumes

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters

AUTOS : SECTOR UPDATE

Entry segment continues to

face pressure owing to
competition from
incumbents like Renault
Kwid and Nissan Redi-go

Retail volume growth were

in line with wholesale
growth of 12.5-13% YoY in
Aug16

Maruti Suzuki India (CMP Rs 5,061, Market Cap Rs 153tn, BUY)

Sales Volumes (In Units)
Particulars
Mini (Alto, Wagon-R)
Compact (Swift, Ritz, Dzire,
Celerio, Baleno)
Super Compact (Dzire Tour)
Mid-size (Ciaz)
Total Passenger cars
Utility Vehicles (Gypsy, S-Cross,
Ertiga, Vitara Brezza)
Vans (Omni, Eeco)
LCV (Super Carry)
Total Domestic Sales
Total Export Sales
Total Sales (Domestic + Export)

FY17
163,264

YTD
FY16 % Change
180,218
-9.4%

45,579

41,461

9.9%

228,166

219,766

3.8%

2,986
6,214
90,269

3,172
4,156
86,454

-5.9%
49.5%
4.4%

13,841
25,066
430,337

14,451
19,629
434,064

-4.2%
27.7%
-0.9%

16,806

7,836

114.5%

73,536

30,302

142.7%

12,831
25
119,931
12,280
132,211

12,491
0
106,781
11,083
117,864

2.7%
12.3%
10.8%
12.2%

64,137
25
568,035
49,721
617,756

58,514
0
522,880
58,025
580,905

9.6%
8.6%
-14.3%
6.3%

Ask rate for 7MFY17

Monthly
% YoY

126,925
11,614
138,539

13.5%
23.4%
14.3%

Source: Company, HDFC sec Inst Research

Domestic Sales Growth Bounced Back Sharply

Domestic
160
140
120
100
80
60
40
20
0

Exports

Cars

40%

100%

30%

80%

20%
10%
0%
-10%
-20%

Source: Company, HDFC sec Inst Research

Mix Remains Stable

YoY Growth

(in '000 units)

Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16

Management is confident
of maintaining double digit
growth in FY17E

2016
35,490

Aug
2015 % Change
37,665
-5.8%

UVs

Vans

60%
40%
20%
0%

Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16

MSIL reported volume

growth of 12% YoY.
Domestic growth was
strong at 12% YoY driven by
Brezza, Baleno and Ciaz

Source: Company, HDFC sec Inst Research

Page | 2

AUTOS : SECTOR UPDATE

M&Ms PV sales rose 29%

YoY, led by launches of
TUV300 and KUV100 in
2HFY16

LCV sales (< 3.5 T), mainly

representing pick-ups, saw
small growth of 7% YoY

MHCV volumes continue to

show strong growth on a
low base

Mahindra & Mahindra (CMP Rs 1,454, Market Cap Rs 858bn, BUY)

Auto Sales Volumes (In Units)
Particulars

2016
18,246
17,119
1,127
13,993
13,049
573
371
4,705
36,944
3,647
40,591

Passenger Vehicles
- Utility Vehicles
- Cars + Vans
Commercial vehicles
- LCV < 3.5T
- LCV > 3.5T
- MHCV
3W (incl. Alfa)
Total Auto Sector (Dom.)
Exports (UV +3W)
Total Vehicles (Dom + Exp)

Aug
2015 % Change
14,198
28.5%
13,307
28.6%
891
26.5%
13,023
7.4%
12,254
6.5%
428
33.9%
341
8.8%
4,483
5.0%
31,704
16.5%
3,512
3.8%
35,216
15.3%

FY17
94,962
88,990
5,972
66,757
60,920
3,594
2,243
21,491
183,210
18,369
201,579

YTD
Ask rate for 7MFY17
FY16 % Change Monthly
% YoY
82,133
15.6%
75,865
17.3%
6,268
-4.7%
60,644
10.1%
55,934
8.9%
3,048
17.9%
1,662
35.0%
21,132
1.7%
163,909
11.8%
49,056
16.7%
15,526
18.3%
2,776
-5.2%
179,435
12.3%
51,832
15.3%

FY17
100,428
5,263
105,691

YTD
Ask rate for 7MFY17
FY16 % Change Monthly
% YoY
84,174
19.3%
16,854
12.8%
5,343
-1.5%
958
23.6%
89,517
18.1%
17,813
13.3%

Farm Equipment Segment Sales Volumes (In Units)

2016
12,327
1,216
13,543

Domestic
Exports
Total Tractors (Dom + Exp)

Aug
2015
10,751
948
11,699

% Change
14.7%
28.3%
15.8%

Source: Company, HDFC sec Inst Research

Auto Segment Growth Going Strong

60

Tractor Sales Performance Improved YoY

YoY Growth

(in '000 units)

50

Tractors
30%
20%

40
30
20

25
20

0%

15

-10%

-20%

(in '000 units)

30

10%

10

Source: Company, HDFC sec Inst Research

35

YoY Growth

10
5
0

120%
100%
80%
60%
40%
20%
0%
-20%
-40%
-60%

Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16

Auto

Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16

M&Ms domestic tractor

sales rose 16% YoY aided by
a low base and improving
rural sentiments (owing to
above normal monsoon)

Particulars

Source: Company, HDFC sec Inst Research

Page | 3

AUTOS : SECTOR UPDATE

There continues to be stress

in the overseas markets of
Srilanka, Bangladesh,
Nigeria and Philippines.
Egypt on the other hand is
witnessing some
improvement. Nigeria
recorded 16-17k 2W retails
and 1.5-2k 3Ws

BAL Sales Volumes (In Units)

Particulars

2016
279,911
45,436
325,347
125,033
200,314

Motorcycles
3Ws
Total
Exports
Domestic

Aug
2015
290,436
51,529
341,965
181,658
160,307

% Change
FY17
-3.6% 1,437,978
-11.8%
211,935
-4.9% 1,649,913
-31.2%
627,493
25.0% 1,022,420

YTD
Ask rate for 7MFY17
FY16 % Change Monthly
% YoY
1,448,104
-0.7%
237,121
-10.6%
1,685,225
-2.1% 363,434
15.2%
822,844
-23.7% 159,261
21.6%
862,381
18.6% 204,172
10.7%

Source: Company, HDFC sec Inst Research

Domestic MC Volumes Outpaces The Industry

2W
500

3W

Exports Continue To Be Under Stress

Exports

YoY Growth

(in '000 units)

30%
20%

400

10%

300

0%
200

-10%

100

-20%

-30%

Source: Company, HDFC sec Inst Research

200

YoY Growth

(in '000 units)

30%
20%

150

10%
0%

100

-10%
-20%

50

-30%
-40%

Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16

The management believes

that its market share in
domestic motorcycles is
stable at 20% for the month
and sees a monthly run rate
of 220k+ units going ahead
for FY17

Bajaj Auto (CMP Rs 2,999, Market Cap Rs 868bn, NEUTRAL)

Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16

Bajaj Autos Aug-16

volumes were soft in line
with the management
commentary. However,
domestic motorcycles were
up 25% vs industry growth
of 22% led by the recent
launch of V15

Source: Company, HDFC sec Inst Research

Pulsar 400s launch has

been pushed ahead to
3QFY17 as the
management indicated the
immediate focus would be
on the festive season
Page | 4

AUTOS : SECTOR UPDATE

Hero MotoCorp (CMP Rs 3,548, Market Cap Rs 708bn, BUY)

HMSI reported strongest

ever domestic sales led by
robust scooter sales owing
to higher supplies from its
fourth Gujarat plant. The
company has gained 2%
market share in Aug-16
The company is well-placed
to benefit from the festive
season given its capacities
are in place. In a period of 2
months, HMSI achieved
100% peak production at its
second assembly line

Particulars

2016
616,424

Total sales

Aug
2015
480,537

YTD
Ask rate for 7MFY17
% Change
FY17
FY16 % Change Monthly
% YoY
28.3% 2,893,926 2,613,660
10.7%
615,155
7.2%

Source: Company, HDFC sec Inst Research

HMSI Sales Volumes (In Units)

Particulars

2016
336,393
129,949
26,074
492,416

Scooters
Motorcycles
Exports
Total

Aug
2015
246,763
126,373
22,060
395,196

YTD
% Change
36.3%
2.8%
18.2%
24.6%

FY17
1,442,719
691,164
107,130
2,241,013

FY16
1,138,644
619,945
82,801
1,841,390

% Change
26.7%
11.5%
29.4%
21.7%

Source: Company, HDFC sec Inst Research

Hero Posted Strongest Ever Growth

2W

HMSI Strong Show Across Board

2W

YoY Growth

(in '000 units)

YoY Growth

(in '000 units)

40%

600

30%

500

30%

20%

400

20%

10%

300

10%

0%

200

0%

100

-10%

100

-10%

-20%

-20%

700
600
500
400
300
200

Source: Company, HDFC sec Inst Research,

40%

Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16

The company has lined up

15 new launches in the
domestic and export
market in FY17. Of these
15, 3 would be launched in
the festive season (Achiever
150cc, Super Splendor,
Passion Pro)

HMCL Sales Volumes (In Units)

Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16

HMCL recorded highest

ever volumes in Aug-16 of
28% YoY owing to a low
base last year, above
average monsoon and early
festive season.

Source: Company, HDFC sec Inst Research

Page | 5

AUTOS : SECTOR UPDATE

Ashok Leyland (CMP Rs 84, Market Cap Rs 238bn, Neutral)

ALs domestic MHCV sales
declined 8% YoY owing to
higher base and pre-buying
in 2QFY15 (implementation
of ABS) last year

AL Sales Volumes (In Units)

Particulars

2016
8,201
2,696
10,897

MHCV
LCV
Total sales

Aug
2015
8,903
2,641
11,544

% Change
-7.9%
2.1%
-5.6%

FY17
40,408
12,144
52,552

YTD
FY16
39,223
11,561
50,784

% Change
3.0%
5.0%
3.5%

Ask rate for 7MFY17

Monthly
% YoY
11,956
18.6%
3,132
14.6%
15,088
17.8%

Source: Company, HDFC sec Inst Research

Weak MHCV Vols For Second Consecutive Month

MHCV
14.0

YoY Growth

(in '000 units)

LCV
120%

12.0

100%

10.0

80%

8.0

60%

6.0

40%

4.0

20%

2.0

0%

0.0

-20%

Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16

The management reckons

that with BS IV norms
coming in from Apr-17,
there could be pick up of
volumes in 2HFY17 owing
to pre-buying

LCV Witnessed Muted Performance

Source: Company, HDFC sec Inst Research

4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0

YoY Growth

(in '000 units)

50%
40%
30%
20%
10%
0%
-10%
-20%

Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16

LCV segment reported a

weaker performance than
the industry

Source: Company, HDFC sec Inst Research

Page | 6

AUTOS : SECTOR UPDATE

Eicher Motors (CMP Rs 22,774, Market Cap Rs 617bn, BUY)

LMD segments volume

growth tapered down
during the month

Eicher Sales Volumes (In Units)

Particulars

2016
2,328
939
833
4,100
55,721

LMD
HD
Buses
Total ETB
Royal Enfield

Aug
2015
2,243
744
624
3,611
42,360

FY17
11,813
5,690
6,826
20,014
256,582

YTD
FY16
9,518
3,532
6,076
15,474
189,733

% Change
24.1%
61.1%
12.3%
29.3%
35.2%

Ask rate for 7MFY17

Monthly
% YoY

5,873
54,012

28.2%
18.7%

Source: Company, HDFC sec Inst Research

ETB Witnessing Robust Growth Across Segments

Total ETB

RE Sales Growth Above Expectation

YoY Growth

7,000

RE
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
-10.0%

6,000
5,000
4,000
3,000
2,000
1,000
0

Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16

RE recorded highest ever

volumes owing to the
recent launch of Himalayan
and higher penetration in
new markets (rolling out 23 outlets per week in
smaller cities)

% Change
3.8%
26.2%
33.5%
13.5%
31.5%

Source: Company, HDFC sec Inst Research

60.0

YoY Growth

(in '000 units)

50.0
40.0
30.0
20.0
10.0
-

80%
70%
60%
50%
40%
30%
20%
10%
0%

Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16

Eichers ETB division

reported strong growth of
14% YoY, much ahead of
the industry growth driven
by strong volumes in the
HD segment. The HD
segment growth at 26% is
much higher than other
industry incumbents

Source: Company, HDFC sec Inst Research

Page | 7

AUTOS : SECTOR UPDATE

Management indicated
that MHCVs volumes were
disappointing owing to
postponement of
replacement and fleet
expansion

Tata Motors (CMP Rs 544, Market Cap Rs 185tn, BUY)

TTMT Sales Volumes (In Units)
Particulars
LCV
MHCV
Commercial Vehicles
Cars
UVs & SUVs
Passenger Vehicles
Exports
Total

2016
13,495
9,969
23,464
11,435
1,567
13,002
6,595
43,061

Aug
2015
12,267
12,017
24,284
9,814
1,380
11,194
5,202
40,680

% Change
10.0%
-17.0%
-3.4%
16.5%
13.6%
16.2%
26.8%
5.9%

We raise our JLR multiple

given the strong product
pipeline and diversified
geographical presence and
our revised SOTP stands at
Rs 625

36,467

23.6%

12,798
5,691
54,956

23.0%
16.5%
22.7%

MHCV
20.0

LCVs Growing Steadily On A Low Base

YoY Growth

(in '000 units)

15.0
10.0

LCV
80%

25.0

60%

20.0

40%

15.0

20%
0%

5.0
0.0

Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16

UV segment is also picking

up pace and recorded
highest ever growth since
Aug-12

% Change
5.9%
1.7%
4.0%
17.0%
-27.4%
10.2%
8.4%
6.1%

Ask rate for 7MFY17

Monthly
% YoY

Source: Company, HDFC sec Inst Research

MHCVs Continued To De-Grow

Passenger car segment is
going strong with strong
demand for Tiago. As per
channel checks, Tiago has a
waiting period of three
months

FY17
69,186
56,848
126,034
52,587
5,928
58,515
25,782
210,331

YTD
FY16
65,356
55,884
121,240
44,951
8,164
53,115
23,791
198,146

Source: Company, HDFC sec Inst Research

YoY Growth

(in '000 units)

20%
10%
0%
-10%

10.0

-20%

-20%

5.0

-30%

-40%

0.0

-40%

Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16

Tata Motors reported sharp

de-growth in MHCV volume
for the third consecutive
month of 17% YoY. LCV
sales continued its strong
show with 104% YoY
growth

Source: Company, HDFC sec Inst Research

Page | 8

AUTOS : SECTOR UPDATE

SML Isuzu (CMP Rs 1,353, Market Cap Rs 20bn, BUY)

The companys product

portfolio is equipped well in
advance for the
implementation of Bharat
Stage IV emission norms
across India by Apr-17 and
new bus body code in the
CV Industry. We believe,
this will augur well for SML,
which has 20% market
share in the school bus
segment

SML Sales Volumes (In Units)

Particulars

2016
1,082

Total sales

Aug
2015
960

% Change
12.7%

FY17
7,343

YTD
FY16
5,878

% Change
24.9%

Ask rate for 7MFY17

Monthly
% YoY
1,109
13.8%

Source: Company, HDFC sec Inst Research

SML Volume Growth Was Muted

Total sales

YoY Growth

2500

140%
120%
100%
80%
60%
40%
20%
0%
-20%
-40%

2000
1500
1000
500
0

Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16

SML reported strong 12%

YoY volume growth in an
otherwise weak month for
the industry

Source: Company, HDFC sec Inst Research

Page | 9

AUTOS : SECTOR UPDATE

Atul Auto (CMP Rs 442, Market Cap Rs 10bn, BUY)

Particulars

2016
3,915

Total Sales

Aug
2015
3,906

% Change
0.2%

FY17
14,701

YTD
FY16
16,461

% Change
-10.7%

Ask rate for 7MFY17

Monthly
% YoY
4,486
14.5%

Source: Company, HDFC sec Inst Research

AALs Monthly Volume Trend

(in '000 units)

Atul Auto

Major 3W OEMs Volume Trend*

Bajaj Auto

YoY Growth

Atul Auto

60

40%

20%

0%

-20%

-40%

10

-60%

Source: Company, HDFC sec Inst Research

TVS Motor

50
40
30
20

Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16

The sales volume picked up

MoM (+23%) owing to
healthy spread of monsoon

ATA Sales Volumes (In Units)

Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16

After reporting bad volume

growth in July, Atul Auto
posted flat volume growth
(+0.2% YoY) in August

Source: Company, HDFC sec Inst Research

*These 3 companies account for 70% of total 3W volume

Page | 10

AUTOS : SECTOR UPDATE

Peer Valuations

Ashok Leyland
Atul Auto
Bajaj Auto
Eicher Motors
Hero Motocorp
M&M
Maruti Suzuki
SML Isuzu
Tata Motors

MCAP
(Rs/bn)

CMP
(Rs/sh)

Reco

TP

238
10
868
617
708
858
1,529
20
1,846

84
442
2,999
22,774
3,548
1,454
5,061
1,353
544

NEU
BUY
NEU
BUY
BUY
BUY
BUY
BUY
BUY

82
569
2,716
24,736
3,731
1,615
5,318
1,588
625

Adj EPS (Rs/sh)

FY16 FY17E FY18E
3.9
4.3
5.1
21.6
26.0
32.3
126.2 139.4 157.2
587.1 672.5 894.4
156.8 177.7 207.1
55.5
69.8
88.3
153.9 200.4 245.6
35.3
52.7
67.9
40.6
49.9
59.2

FY16
21.5
20.5
23.8
38.8
22.6
26.2
32.9
38.3
13.4

P/E (x)
FY17E
19.5
17.0
21.5
33.9
20.0
20.8
25.3
25.7
10.9

FY18E
16.3
13.7
19.1
25.5
17.1
16.5
20.6
19.9
9.2

EV/EBITDA (x)
FY16 FY17E FY18E
11.5
10.4
9.1
12.6
10.0
8.0
16.3
14.5
12.5
21.8
19.1
14.3
15.2
13.1
10.9
15.6
12.7
10.3
16.8
15.2
12.4
23.3
16.3
12.4
6.2
5.5
4.8

FY16
20.9
34.4
31.8
41.0
43.1
15.6
18.3
15.9
20.1

RoE (%)
FY17E FY18E
21.0
22.4
32.6
32.3
30.8
30.8
41.5
40.1
40.7
40.6
17.5
19.5
20.7
21.9
20.7
22.8
19.1
18.9

Source: Company, HDFC sec Inst Research

Page | 11

AUTOS : SECTOR UPDATE

Quarterly Average Price Trends For Key Commodities

If commodity prices
continue to remain
northward bound, it could
lead to price markups for
PV segment players

Commodities
CRC (USD/MT)
LME Aluminium (USD/MT)
LME Lead (USD/MT)
Brent (USD/bbl)
RSS4 (Rs/MT)

2QFY15
649
1,988
2,181
102
13,272

3QFY15
634
1,968
2,001
76
11,970

4QFY15
574
1,801
1,810
54
12,606

1QFY16
509
1,767
1,938
62
12,617

2QFY16
431
1,594
1,718
50
11,846

3QFY16
379
1,494
1,682
43
10,873

4QFY16
442
1,515
1,740
35
9,989

1QFY17
QTD
500
479
1,572 1,633
1,718 1,837
46
46
13,215 13,978

% QoQ
CRC (USD/MT)
LME Aluminium (USD/MT)
LME Lead (USD/MT)
Brent (USD/bbl)
RSS4 (Rs/MT)

2QFY15
(1.3)
10.4
4.0
(6.9)
(8.2)

3QFY15
(2.3)
(1.0)
(8.2)
(25.5)
(9.8)

4QFY15
(9.4)
(8.5)
(9.5)
(29.2)
5.3

1QFY16
(11.3)
(1.9)
7.0
15.1
0.1

2QFY16
(15.3)
(9.8)
(11.3)
(19.2)
(6.1)

3QFY16
(12.1)
(6.3)
(2.1)
(13.7)
(8.2)

4QFY16
16.6
1.4
3.4
(20.3)
(8.1)

1QFY17
13.2
3.8
(1.3)
33.4
32.3

QTD
(4.2)
3.9
7.0
(0.9)
5.8

Source: Bloomberg, HDFC sec Inst Research

MSILs margins could face

some pressure from
appreciation of JPY

Quarterly Average Currency Exchange Rates

Currency
USD-INR
EUR-INR
GBP-INR
EUR-USD
GBP-USD
USD-JPY
JPY-INR

2QFY15
60.58
80.29
101.17
1.33
1.67
104.00
0.58

3QFY15
62.01
77.38
98.09
1.25
1.58
114.54
0.54

4QFY15
62.26
70.22
94.34
1.13
1.51
119.18
0.52

1QFY16
63.49
70.30
97.17
1.11
1.53
121.36
0.52

2QFY16
64.97
72.27
100.70
1.11
1.55
122.24
0.53

3QFY16
65.93
72.22
100.04
1.10
1.52
121.41
0.54

4QFY16
67.51
74.42
96.67
1.10
1.43
115.25
0.59

1QFY17
QTD
66.92 67.06
75.56 74.72
96.08 88.17
1.13
1.11
1.44
1.31
107.97 102.65
0.62
0.65

% QoQ
USD-INR
EUR-INR
GBP-INR
EUR-USD
GBP-USD
USD-JPY
JPY-INR

2QFY15
1.3
(2.0)
0.5
(3.4)
(0.8)
1.9
(0.5)

3QFY15
2.4
(3.6)
(3.0)
(5.8)
(5.2)
10.1
(6.9)

4QFY15
0.4
(9.3)
(3.8)
(9.8)
(4.3)
4.1
(3.7)

1QFY16
2.0
0.1
3.0
(1.7)
1.2
1.8
0.1

2QFY16
2.3
2.8
3.6
0.5
1.1
0.7
1.7

3QFY16
1.5
(0.1)
(0.7)
(1.5)
(2.1)
(0.7)
2.1

4QFY16
2.4
3.0
(3.4)
0.7
(5.7)
(5.1)
7.8

1QFY17
(0.9)
1.5
(0.6)
2.4
0.3
(6.3)
5.9

QTD
0.2
(1.1)
(8.2)
(1.3)
(8.5)
(4.9)
5.3

Source: Bloomberg, HDFC sec Inst Research

Page | 12

AUTOS : SECTOR UPDATE

Rating Definitions
BUY

Where the stock is expected to deliver more than 10% returns over the next 12 month period

NEUTRAL

Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period

SELL

Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

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Page | 13

AUTOS : SECTOR UPDATE

HDFC securities
Institutional Equities
Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park,
Senapati Bapat Marg, Lower Parel,
Mumbai - 400 013
Board : +91-22-6171 7330
www.hdfcsec.com
Page | 14