Sector View All eyes on festive season…content.icicidirect.com/mailimages/IDirect_Motogaze_Oct... · 2016-03-14 · ICICI Securities Ltd. | Retail Equity Research October 19, 2015

ICICI Securities Ltd. | Retail Equity Research

October 19, 2015

MotoGaze October 2015

All eyes on festive season… In September 2015, overall auto volumes declined marginally by 0.5% YoY. The growth in PV and CV, which are more urban & macro centric, was largely offset by de-growth in rural centric two-wheeler (2-W). The new product launches (S-Cross, Creta) by the top two PV players (MSIL, Hyundai) helped the space register growth of 2.9% YoY. Overall CV volumes were up 9.8% YoY, largely driven by M&HCV volumes that were up 54% YoY (partly due to pre-buying ahead of implementation of ABS with effect from October 2015). LCV (volumes down 12.9% YoY) is yet to witness a meaningful recovery. On the flip side, 2-W volumes declined 0.7% YoY, post the 14% below normal monsoon. The trend of scooter (grew 5.1% YoY) volumes outpacing motorcycles (declined 1.7% YoY) continued, providing cushion to the 2-W segment. The 3-W volumes were up marginally 1% YoY. All eyes are now on the festive season, which is likely to result in higher discretionary spend and spur volume growth for the space. Even though this year (Dussehra, Diwali) is spread across two months (October, November respectively) against both festivals in October last year (2014), we believe volume growth for OEMs would be divided in two months.

Macro tailwinds likely to pick up with economic revival!

Going ahead, with an improvement in overall economic activity, we believe macro headwinds like interest rate and inflation are turning positive and would help the industry. Both CPI and WPI have shown a considerable decline over the last year, which gives RBI adequate room to further cut rates as global crude prices have also corrected sharply.

New launches coupled with improved sentiment reviving demand…

For H1FY16, overall auto volumes grew marginally by ~1.3% YoY. This was mainly driven by PV and CV, which grew 5.8% YoY and 8.7% YoY, respectively, while 2-W and 3-W volumes are up 0.5% YoY and 3.8% YoY, respectively. We believe the auto industry would show some signs of a recovery, from H2FY16E onwards. The new product launches and refreshes across segments & companies, coupled with festive season and improved sentiments would lead to this turnaround in demand for OEMs.

Industry outlook

With an improvement in demand sentiments, we expect the overall industry to grow 3-5% YoY for FY16E. We believe the PV space is likely to grow 7-9% YoY. The strong growth momentum in M&HCV volumes is likely to continue (expect 16-18% YoY growth) while the LCV segment is yet to recover meaningfully in FY16E. The 2-W segment is likely to grow 3-5% YoY, led by strong growth in the scooter segment, which would be partially offset by subdued growth in the motorcycle segment. Below normal monsoons and lower crop yield are likely to impact rural demand and the 2-W space. Tractor volumes are likely to remain largely flat in FY16E with some recovery expected in H2FY16E. On a longer term basis, we remain positive on the growth prospects of the industry with a rise in incomes augmenting auto penetration levels in the country. On the basis of index performance, for September 2015, the BSE Auto index was down 3.4% underperforming the BSE Sensex, down 0.9%. Among our I-direct auto coverage, we remain bullish on frontline OEM stocks like Eicher Motors and Maruti Suzuki. However, with the favourable impact of operating leverage due to increased demand as well as lower raw material prices, the earnings growth trajectory for ancillary stocks is likely to remain on the uptrend. Hence, valuations for the same are likely to remain elevated vis-à-vis the average of the last five years.

Sector View

Equalweight

Volume performance…

Company Gr. YoY(%)Hero Motocorp 0.4Bajaj Auto -3.8TVS Motors -11.9Maruti Suzuki 3.7Tata Motors -2.0Mahindra and Mahindra -4.6Ashok Leyland 60.6

Key players & industry volume growth – Sept’15 (%)

-3.8

3.7

9.8

60.6

11.9

26.3

12.4

1.9

4.2

-3.5

11.1

20.2

3.5

28.0

-0.5

-11.9

0.4

-6.1

-2.0

-4.6

Industry

HMCL

BAL

TVS

HMSI

Maruti

TML

M&M

Hyundai

ALL

MoM gr YoY gr

Source: Siam

Key players & industry volume growth YTD (%)

1.3

-5.5

1.3

1.8

2.4

11.7

2.1-2.4

5.9

44.5

Industry

HMCL

BAL

TVS

HMSI

Maruti

TML

M&M

Hyundai

ALL

YTD gr

Source: Siam Research Analyst

Nishit Zota [email protected] Vidrum Mehta [email protected]


Page 2

Two & three wheeler industry In September 2015, 2-W volumes declined 0.7% YoY, mainly due to weak rural demand after the country received below normal monsoon of 14%. The growth in the 2-W space was supported by the scooter segment, which continues to outperform the motorcycle space registering 5.1% YoY growth. The motorcycle segment declined 1.7% YoY during the month. Market leader HMCL volumes were up marginally 0.4% YoY. On the flip side, BAL and HMSI volumes declined 4.8% and 6.1% YoY, respectively. The HMSI scooter segment posted growth of 9.2% YoY mainly lead by Honda’s Activa and Dio.

The three-wheeler (3-W) industry at 94,254 units was up 1% YoY, with decline in domestic volumes of ~13% YoY offset by export growth of ~23% YoY. The market leader BAL’s volumes were up 3.3% YoY.

Market share movement According to data released by the Society of Indian Automobile Manufacturers (Siam), the domestic market share of two and three-wheeler players as of September 2015 is mentioned below.

Exhibit 1: Domestic market share movement in two-wheelers

11.7

40.6

12.9

25.9

8.9

11.7

38.4

13.3

26.7

10.011.8

38.4

13.1

26.7

10.0

0

5

10

15

20

25

30

35

40

45

Bajaj Auto Hero MotoCorp TVS Motors HMSI Others

(%)

Sep-14 Aug-15 Sep-15

Source: Siam, Data used is YTD

Exhibit 2: Domestic market share movement in three-wheelers

46.2

31.7

10.1

12.0

46.5

30.7

10.5

12.3

46.4

30.5

10.7

12.4

0 5 10 15 20 25 30 35 40 45 50

Bajaj Auto

Piaggio

M&M

Others

(%)



The 2-W segment is witnessing an overall slowdown due

to weak rural demand. HMCL, which derives ~50% of its

volumes from rural areas, is losing its share against some

of its peers

In September 2015, domestic 3W volumes were up 1%

YoY. However, top two players in the space viz. BAL and

Piaggio continue to maintain their strong leadership

position. However, they marginally lost market share on an

MoM basis


Page 3

Exhibit 3: Domestic market share movement in motorcycles

17.0

52.9

6.1

16.217.7

52.6

6.5

14.317.8

52.4

6.5

14.3

0

10

20

30

40

50

60

Bajaj Auto Hero Motocorp TVS motor Honda

(%)


Source: Company, ICICIdirect.com Research

Exhibit 4: Domestic market share movement in scooters/scooterettes

16.1 15.4

55.0

13.512.515.0

58.7

13.812.715.1

58.4

13.8

0

10

20

30

40

50

60

70

Hero Motocorp TVS Motors Honda Others

(%)



The motorcycle segment is facing growth challenges, with

volumes declining 1.7% YoY for September 2015. Hero

MotoCorp maintained its leadership position with market

share of ~52%. Bajaj Auto has seen a good comeback in

the domestic market and seen an improvement of its share

of 80 bps YoY to ~17.8%

The domestic scooter segment continued to outperform the

motorcycle segment witnessing growth of 5.1% YoY for

September 2015. The HMSI domestic scooter segment

registered volume growth of 9.2% YoY and continues to

dominate the space with market share of ~58%


Page 4

Exhibit 5: Market share movement in executive motorcycle (<125 cc) segment*

22.1

55.9

6.8

15.2

0

10

20

30

40

50

60

70

Sep-

13Oc

t-13

Nov

-13

Dec-

13Ja

n-14

Feb-

14M

ar-1

4Ap

r-14

May

-14

Jun-

14Ju

l-14

Aug-

14Se

p-14

Oct-1

4N

ov-1

4De

c-14

Jan-

15Fe

b-15

Mar

-15

Apr-1

5M

ay-1

5Ju

n-15

Jul-1

5Au

g-15

Sep-

15

(%)

0

4

8

12

16

20

(%)

Bajaj Auto (RHS) Hero Motocorp (LHS) TVS (RHS) HMSI (RHS)

Source: Siam * only top 4 two-wheeler OEMs

Exhibit 6: Market share movement in greater than 125 cc segment

74.4

9.5

16.0

9.3

0

10

20

30

40

50

60

70

80

90

Sep-

13

Oct-1

3

Nov

-13

Dec-

13

Jan-

14

Feb-

14

Mar

-14

Apr-1

4

May

-14

Jun-

14

Jul-1

4

Aug-

14

Sep-

14

Oct-1

4

Nov

-14

Dec-

14

Jan-

15

Feb-

15

Mar

-15

Apr-1

5

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

(%)

0

5

10

15

20

25

30

35

(%)

Bajaj Auto (LHS) Hero Motocorp (RHS) TVS (RHS) HMSI (RHS)

Source: Siam *only top three vehicle two-wheeler OEMs

HMCL continues to dominate the executive motorcycle

segment (<=125 cc) in India. HMCL’s market share has

been more or less stable over the last two or three months.

However, Bajaj Auto has returned to the growth trajectory

gaining share from ~15% in March 2015 to ~22% in

September 2015. HMSI has also regained some of its lost share and is currently at 15%


Page 5

Hero MotoCorp (HERHON) • Volumes of Hero MotoCorp, the market leader in the 2-W

segment, declined 0.4% YoY to 606,744 units. Given the fact that HMCL volumes in the past couple of months were < 5 lakh units, volumes came in above expectations. The company, even after 11 months, managed to cross the 6 lakh monthly volumes. The new product launches/refreshes are likely to increase the company’s volumes, thereby gaining market share, going forward

• The motorcycle segment at ~5.4 lakh units grew 3.2% YoY. With

competition intensifying, HMCL’s domestic scooter volumes declined 17.7% YoY. Unlike its peers (HMSI and TVS), scooter volumes of HMCL declined 17.7% YoY, as volumes of Maestro and Pleasure declined 0.5% YoY and 38.2% YoY, respectively

• Export volumes declined 26.2% YoY to 17,100 units. This was

largely after scooter exports (mainly Pleasure), came in at 1,822 units against 11,742 units in September 2014. The management continues to focus on the exports market and is likely to expand its global footprint by entering 50 markets with the target of selling 12 million units (~10% of total volume) by FY20E

Exhibit 7: Volume performance (in units) Segment Sep-15 Sep-14 %chg Aug-15 %chg YTD'16 YTD'15 %chgMotorcycles 541,936 525,314 3.2 427,251 26.8 2,879,007 3,020,417 -4.7Scooters 64,808 78,738 -17.7 53,286 21.6 341,397 387,235 -11.8Total Sales 606,744 604,052 0.4 480,537 26.3 3,220,404 3,407,652 -5.5Export(inc. above) 17,100 23,170 -26.2 19,980 -14.4 104,860 96,132 9.1Exports (% of sales) 2.8 3.8 -102 bps 4.2 -134 bps 3.3 2.8 44 bpsSource: Company, Siam

Bajaj Auto (BAAUTO) • Bajaj Auto’s (BAL) 2-W volumes declined 4.8% YoY. However, in

the past five or six months, the volume recovery has helped BAL increase its market share in the motorcycle space to ~18% vs. < 16% in March 2015. It is further expected to be ~24% by FY16E

• Domestic 3-W volumes declined 11.9% YoY. On the other hand,

export volumes were up 18.3% YoY, offsetting the decline in domestic sales. Overall, 3-W volumes were up 3.3%. Export markets like Nigeria and Egypt have fared well for BAL

• BAL expects the domestic motorcycle industry to grow ~5-7% in

FY16E with its volumes likely to outpace industry growth mainly on the back of re-launches and its focus on the economy and premium segment. A recovery in export demand would help BAL achieve its export target of 2 million units for FY16E

Exhibit 8: Volume performance (in units) Segment Sep-15 Sep-14 %chg Aug-15 %chg YTD'16 YTD'15 %chgTotal 2-wheeler sales 330,228 347,010 -4.8 290,436 13.7 1,778,332 1,774,011 0.22W exports 187,711 147,759 27.0 152,488 23.1 822,780 821,776 0.12W domestic sales 142,517 199,251 -28.5 137,948 3.3 955,552 952,235 0.3Total 3-wheeler sales 54,172 52,440 3.3 51,529 5.1 291,293 270,001 7.93W exports 31,284 26,452 18.3 29,170 7.2 173,865 139,284 24.83w domestic sales 22,888 25,988 -11.9 22,359 2.4 117,428 130,717 -10.2Total Sales 384,400 399,450 -3.8 341,965 12.4 2,069,625 2,044,012 1.3Total Domestic Sales 210,599 225,239 -6.5 160,307 31.4 1,072,980 1,082,952 -0.9Total Exports 173,801 174,211 -0.2 181,658 -4.3 996,645 961,060 3.7Exports as % of sales 45.2 43.6 160 bps 53.1 -791 bps 48.2 47.0 114 bpsSource: Company, Siam

Hero MotoCorp: Sales volumes

525

483

463

443 481

416 47

247

6 517

484

433

427 54

2

79

9383

6960 58

5359 54 53

65

84 78

0

100

200

300

400

500

600

Sep'

14

Nov

'14

Jan'

15

Mar

'15

May

'15

Jul'1

5

Sep'

15

('000

s)

0102030405060708090100

('000

s)

Motorcycles Scooters

Source: Siam, ICICIdirect.com Research

Bajaj Auto: Sales volumes

347

337

262

264

247

216

210 28

6

302

288

282

290 33

0

52 49

47 47

42

27 41

50 44 44 48 52

54

45

5350

474648

39

4650

5554

4144

0

50

100

150

200

250

300

350

400

450

Sep'

14

Nov

'14

Jan'

15

Mar

'15

May

'15

Jul'1

5

Sep'

15

('000

s)

30

35

40

45

50

55

60

(%)

Two-Wheelers Three-Wheelers % exports



Page 6

TVS Motors (TVSSUZ) • TVS’ volumes (2-W+3-W) for September 2015, at ~2.32 lakh units,

were down 10.5% YoY. The 2-W volumes were down 11.9% YoY while 3-W posted good growth of 28.4% YoY for September 2015

• The motorcycle segment declined 7.8% YoY to 90,378 units

mainly after strong growth in its Starcity and Apache was offset by de-growth in Sport. The growth of 6.9% in its scooter segment, driven by Jupiter & Zest, was moderated by a decline in volumes of Wego, Pep + and Streak. Moped volumes declined 32.8% YoY to 55,255 units

• Overall export (~18.7% of sales) volumes grew at a healthy rate of

31.1% YoY to 41,435 units. The export growth was strongly driven by both 2-W and 3-W volumes, which registered growth of 29.7% and 42.4% YoY, respectively, in September 2015

Exhibit 9: Volume performance (in units) Segment Sep-15 Sep-14 %chg Aug-15 %chg YTD'16 YTD'15 %chgMotorcycles 90,378 98,052 -7.8 87,044 3.8 509,791 493,996 3.2Scooters 75,369 70,508 6.9 72,865 3.4 382,902 356,688 7.3Mopeds 55,255 82,275 -32.8 56,872 -2.8 370,916 390,112 -4.9Total 2-W Sales 221,002 250,835 -11.9 216,781 1.9 1,263,609 1,240,796 1.83-Wheelers 11,773 9,167 28.4 10,872 8.3 63,151 53,431 18.2Total Sales 232,775 260,002 -10.5 227,653 2.2 1,326,760 1,294,227 2.5Exports(incl. in above) 41,435 31,616 31.1 42,570 -2.7 245,728 203,052 21.0Exports as % of sales 18.7 12.6 19.6 19.4 16.4Domestice sales 179,567 219,219 -18.1 174,211 3.1 1,017,881 1,037,744 -1.9Source: Company, Siam Honda Motorcycles & Scooters India (HMSI)

• HMSI volumes declined 6.1% YoY to 411,643 units mainly after strong growth in the scooter segment was largely offset by de-growth in its motorcycle segment

• Motorcycle volumes declined 17.9% YoY, led by a sharp drop in

sales of its older “CB series” and “Dream”. The scooter segment posted growth of 9.6% YoY, led by strong growth in Activa & Dio of 8.5% YoY and 33.9% YoY, respectively. On the flip side, Aviator volumes declined by 23.9% YoY

• Export volumes grew 6.6% YoY to 19,089 units, driven by exports

of motorcycles. With HMSI’s focus more on the domestic markets, the segment remains a small part of HMSI’s volume pie (~4.6%)

Exhibit 10: Volume performance (in units) Segment Sep-15 Sep-14 %chg Aug-15 %chg YTD'16 YTD'15 %chgMotorcycles 147,258 179,472 -17.9 138,721 6.2 798,183 949,438 -15.9Scooters 264,385 241,128 9.6 256,508 3.1 1,429,701 1,233,403 15.9Total Sales 411,643 438,500 -6.1 395,229 4.2 2,253,369 2,200,741 2.4Exports(incl.above) 19,089 17,900 6.6 22,060 -13.5 101,906 86,148 18.3Exports as % of sales 4.6 4.1 56 bps 5.6 -94 bps 4.5 3.9 61 bpsDomestice sales 392,554 420,600 -6.7 373,169 5.2 2,151,463 2,114,593 1.7

Source: Company, Siam

TVS Motors : Sales volumes

98 91 86 70 70 74 77 75 91 89 77 87 90

71 71 62

52 56 57 55 49

54 61 70 73 75

82

71

62

59 56 64 69 72

65 61 61 57 55

0

40

80

120

160

200

240

280

Sep'

14

Nov

'14

Jan'

15

Mar

'15

May

'15

Jul'1

5

Sep'

15

(%)

Motorcycles Scooters Mopeds


HMSI: Motorcycles & scooter sales volumes

179

162

137

121 149

139

146

131

138

121

121

139

147

241

199

217

208 22

8

209 23

9

198 21

5

227 26

8 257 264

0

50

100

150

200

250

300

350

400

450

Sep'

14

Nov

'14

Jan'

15

Mar

'15

May

'15

Jul'1

5

Sep'

15

('000

s)

Motorcycles Scooters



Page 7

Four-wheeler industry

The overall passenger vehicles segment for September 2015 grew 2.9% YoY to ~289,588 units. Domestically, the PV segment grew 3.8% YoY while PV exports declined 0.6% YoY. Within the overall PV space, for September 2015, three sub segments viz. cars grew 4.2% YoY, utility vehicles (UVs) volumes were up 2.1% YoY while van volumes declined 10.4% YoY. MSIL, the market leader, outperformed the industry, registering volume growth of 3.7% YoY in September 2015. Utility vehicle (UV) volumes were up 2.1% YoY, underperforming the overall PV market. The UV1 sub-segment grew 15.7% YoY to 41,611 units, mainly driven by new product launches (Hyundai’s Creta volumes at 8,959 units for September 2015 and MSIL’s S-Cross volumes at 3,606 units). The growth was also supported by strong export volumes of Ford India’s Ecosport, which was up 102.9% YoY to 9,439 units during September 2015. UV2 segments volumes declined 16% YoY, after M&M (Scorpio, Xylo, HT, Bolero Plus and XUV500), volumes were down 21.6% YoY to 9,533 units. The commercial vehicles segment witnessed growth of 9.8% YoY to 70,517 units. The M&HCV segment grew 54% YoY to 33,545 units (partially due to pre-buying ahead of implementation of ABS with effect from October 2015) while LCV volumes declined 12.9% YoY to 36,972 units and are yet to witness a meaningful improvement in its volumes.

Market share movement

According to Siam, the domestic market share for passenger vehicles (PV) and commercial vehicles (CV) in September 2015 was as follows: Exhibit 11: Domestic market share movement in passenger vehicles

44.6

16.2

5.8

8.8

2.3

22.2

47.6

17.2

5.7

7.5

1.3

20.7

47.3

17.4

5.7

7.6

1.3

20.7

0 5 10 15 20 25 30 35 40 45 50

Maruti

Hyundai

Tata Motors

M&M

GM

Others

(%)


Source: Siam, Data used is YTD * passenger vehicles as per Siam include Vans like Gio, Maxximo, Eeco, Ace

New product launches have helped the top two passenger

vehicle players in India. MSIL continues to dominate the

passenger vehicle segment with market share of 47.3%.

Positive consumer response to “Creta” has helped Hyundai

increase its market share by ~120 bps YoY to 17.4%


Page 8

Exhibit 12: Market share movement in A2 segment

33.1 32.8

61.3 61.6

0

10

20

30

40

50

60

70

80

Sep-

13

Oct-1

3

Nov

-13

Dec-

13

Jan-

14

Feb-

14

Mar

-14

Apr-1

4

May

-14

Jun-

14

Jul-1

4

Aug-

14

Sep-

14

Oct-1

4

Nov

-14

Dec-

14

Jan-

15

Feb-

15

Mar

-15

Apr-1

5

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

(%)

Hyundai Maruti

Source: Siam, Top two PV OEMs considered

Exhibit 13: Domestic market share movement in commercial vehicles

13.5

25.7

47.4

13.4

18.0

24.1

44.1

13.9

18.8

23.9

44.0

13.4

0

5

10

15

20

25

30

35

40

45

50

ALL M&M Tata Motors Others

(%)


Source: Siam Data used is YTD

Exhibit 14: Segmental share in CVs

30.2

47.6

69.8

52.4

0

10

20

30

40

50

60

70

80

Sep-

13

Oct-1

3

Nov

-13

Dec-

13

Jan-

14

Feb-

14

Mar

-14

Apr-1

4

May

-14

Jun-

14

Jul-1

4

Aug

-14

Sep-

14

Oct-1

4

Nov

-14

Dec-

14

Jan-

15

Feb-

15

Mar

-15

Apr-1

5

May

-15

Jun-

15

Jul-1

5

Aug

-15

Sep-

15

(%)

M&HCV LCV

Source: Siam

The A2 segment is the bread & butter category of the

passenger car segment. The segment growth has

moderated over the last couple of months owing to a lack

of options among diesel variants

The M&HCV segment continued to show growth traction

while the LCV segment is yet to see a meaningful recovery.

The overall growth of ~9.8% YoY in the CV segment was

largely driven by growth in M&HCV, which grew ~54%

YoY while LCV volumes declined 12.9% YoY

The strong volume growth witnessed in the M&HCV

segment over the last year led the LCV, MHCV ratio in

September 2015 to come in at 52:48 against 70:30 in September 2013


Page 9

Tata Motors (TELCO)

• Tata Motors’ standalone volumes declined 2% YoY to 45,215 units. The growth in its passenger cars & M&HCV segment was offset by the weak performance of its LCV & UV categories

• Domestic M&HCV volumes grew 53% YoY while LCV volumes declined 29.2% YoY. The passenger car segment grew 4.7% YoY mainly on the back of its Indica, Bolt & Nano models, which performed well. However, the UV category declined 28.5% YoY due to a decline in volume of its Sumo and Aria. Export volumes declined 16.1% YoY, led by weaker CV exports

• JLR wholesale volumes were up 55.4% YoY and 54.3% MoM at 51,074 units. Jaguar volumes were up 43.7% YoY to 8,211 units; mainly driven by the “XE” (volumes ~3,700 units). Land Rover volumes were up 57.9% YoY to 42,863 units, driven by “Defender” & “Discovery Sport” (~2,800 units & ~9,800 units, respectively). Region wise, the North America and European markets witnessed strong growth while China continued to face challenges

Exhibit 15: Volume performance (in units)

Segment Sep-15 Sep-14 %chg Aug-15 %chg YTD'16 YTD'15 %chgDomestic MHCV 15,915 10,404 53.0 12,017 32.4 72,157 56,428 27.9Domestic LCV 13,124 18,539 -29.2 12,267 7.0 77,287 99,277 -22.2Domestic Pass.Car Sa 10,226 9,765 4.7 9,814 4.2 55,177 43,215 27.7Domestic UV 1,548 2,165 -28.5 1,380 12.2 9,716 13,557 -28.3Exports 4,402 5,246 -16.1 5,212 -15.5 28,234 21,094 33.8Total Sales 45,215 46,119 -2.0 40,690 11.1 241,854 236,793 2.1Jaguar 8,211 5,715 43.7 6,594 24.5 42,889 37,365 14.8Landrover 42,863 27,143 57.9 26,509 61.7 188,308 181,766 3.6Total JLR Sales 51,074 32,858 55.4 33,103 54.3 231,197 219,131 5.5

Source: Company, Siam Maruti Suzuki India (MARUTI)

• Maruti Suzuki’s overall volumes grew 3.7% YoY to 113,759 units and continues to outpace the PV industry, which grew 2.9% YoY

• Domestic volumes grew 6.8% YoY to 106,083 units. Its mini-car segment (Alto & WagonR) volumes declined 3.7% YoY. Further Ciaz, Celerio & Dzire Tour registered a monthly run rate of 5,491 units, 10,428 units & 3,229 units, respectively. Ertiga dispatches were stopped due to its facelift in October 2015, impacting its volumes. The newly launched S-Cross volumes were at 3,606 units

• Export volumes declined 26.6% YoY to 7,676 units while its share is currently at ~6.7% of its total volumes

Exhibit 16: Volume performance (in units) Segment Sep-15 Sep-14 %chg Aug-15 %chg YTD'16 YTD'15 %chgOmni, Eeco,Versa 11,836 11,863 -0.2 12,491 -5.2 70,350 62,364 12.8Alto, Wagon-R, Zen, Swift,Ritz, Celerio, Dzire 80,396 78,851 2.0 79,126 1.6 480,380 389,286 23.4SX4, Swift Dzire Tour, Ciaz 7,520 2,596 189.7 7,328 2.6 41,600 74,311 -44.0Total Passengers 99,752 93,310 6.9 98,945 0.8 592,330 525,961 12.6Gypsy, Vitara,Ertiga 6,331 5,980 5.9 7,836 -19.2 36,633 32,369 13.2Total Domestic 106,083 99,290 6.8 106,781 -0.7 628,963 558,330 12.7Exports 7,676 10,452 -26.6 11,083 -30.7 65,701 63,462 3.5Total Sales 113,759 109,742 3.7 117,864 -3.5 694,664 621,792 11.7Exports as % of sales 6.7 9.5 9.4 9.5 10.2Source: Company, Siam. * estimates

Maruti Suzuki India: sales volumes

104 11

011

0 117 119

112

112 11

511

512

211

811

4

110

9.5

6.7

95

100

105

110

115

120

125

Sep'

14

Nov

'14

Jan'

15

Mar

'15

May

'15

Jul'1

5

Sep'

15

('000

s)

0

2

4

6

8

10

12

(%)

Total Sales Export %


Tata Motors: Domestic sales volume

32.4

31.0

29.4

29.6

29.3

30.3 37

.1

25.9

28.2

29.5

29.5

28.8 33.0

12.3

11.8

12.3

12.2

13.3

13.9 15

.4

10.3 11

.3

10.7

10.7

11.9 12

.3

0

10

20

30

40

50

60

Sep'

14

Nov

'14

Jan'

15

Mar

'15

May

'15

Jul'1

5

Sep'

15

(000

's)

CV Sales PV Sales


Jaguar Land Rover sales volume

41.3

38.5

50.1

31.7

32.9 38

.2 43.0

36.5 40

.7

38.9

34.9

32.6

33.1

0

20

40

60

80

100

Sep'

14Oc

t'14

Nov

'14

Dec'1

4Ja

n'15

Feb'

15M

ar'1

5Ap

r'15

May

'15

Jun'

15Ju

l'15

Aug'

15Se

pt'1

5

(% s

hare

of t

otal

vol

umes

)

10152025303540455055

(000

's)

% Jaguar % LR JLR total volumes(RHS)

S C ICICIdi R h


Page 10

Ashok Leyland (ASHLEY)

• Ashok Leyland’s (ALL) overall volumes grew handsomely by 60.6% YoY to 14,778 units. The M&HCV segment continued to show a stronger improvement in volumes, up 83.1% YoY to 12,134 units. The LCV segment of ALL has also recovered sharply with volumes up 3.9% YoY to 2,637 units

• The M&HCV goods segment saw 105.3% YoY growth while the

M&HCV passenger segment witnessed growth of 27.8% YoY

• Overall exports declined 22.2% YoY, thereby reducing the overall contribution to 6% vs. 12.4% in September 2014

Mahindra and Mahindra (MAHMAH)

• M&M’s overall automotive volumes were down 4.6% YoY to 42,848 units. Its core UV segment (including exports) declined 3.9% YoY underperforming industry volumes, which registered growth of 2.1% YoY, primarily driven by new product launches like Hyundai’s Creta, Maruti’s S-Cross, etc

• Old warhorses Bolero & Scorpio (together contributing 9,048 units, down 31.2% YoY) continue to drive the bulk of volumes. The facelift of the XUV500 (volumes up 5.1% YoY to 3,288 units) & newly launched TUV300 (volumes at 4,321 units) supported M&M to some extent. The new product launches & facelift continue to hold the key for M&M in the extremely competitive space

• The company’s farm equipment segment has been severely impacted by below normal monsoons. Domestic & export tractor volumes declined 37.6% YoY, 37.1% YoY, respectively, resulting in total tractor volumes declining 37% YoY to 18,087 units. We expect tractor volumes to remain under pressure at least for the next couple of months and are likely to pick up thereafter

Exhibit 17: Volume performance (in units) Segment Sep-15 Sep-14 %chg Aug-15 %chg YTD'16 YTD'15 %chgM&HCV Passenger 2,427 1,899 27.8 2,113 14.9 12,411 9,266 33.9M&HCV Goods 9,707 4,729 105.3 6,794 42.9 38,914 23,852 63.1LCV 2,637 2,539 3.9 2,641 -0.2 14,170 12,014 17.9Passenger Vehicles 69 33 109.1 - NA 97 202 -52.0Total Sales 14,778 9,200 60.6 11,548 28.0 65,530 45,334 44.5Exports 888 1,142 -22.2 1,293 -31.3 6,374 5,573 14.4Exports as % of sales 6.0 12.4 11.2 9.7 12.3Source: Company, Siam

Exhibit 18: Volume performance (in units) Segment Sep-15 Sep-14 %chg Aug-15 %chg YTD'16 YTD'15 %chgUV’s 18,717 19,789 -5.4 13,307 40.7 94,771 100,297 -5.54-Wheeler pickups 14,430 15,979 -9.7 13,023 10.8 75,489 80,077 -5.7M & HCV 847 440 92.5 891 -4.9 6,327 4,353 45.3Verito+Verito Vibe - 104 - - - - 1,457 -Total 4wheeler Sales 33,994 36,312 -6.4 27,221 24.9 176,771 186,184 -5.13-Wheeler 5,699 6,096 -6.5 4,901 16.3 27,249 28,479 -4.3

Total Domestic Auto Sales 39,693 42,408 -6.4 32,122 23.6 204,020 214,663 -5.0

Exports 3,155 2,503 26.0 3,512 -10.2 18,681 13,604 37.3

Total Auto Sales 42,848 44,911 -4.6 35,634 20.2 222,701 228,267 -2.4

Exports as % of sales 7.4 5.6 9.9 8.4 6.0

Tractors - Domestic 17,052 27,321 -37.6 10,751 58.6 101,226 129,353 -21.7

- Exports 1,035 1,418 -27.0 948 9.2 6,378 6,354 0.4Total Tractors 18,087 28,739 -37.1 11,699 54.6 107,604 135,707 -20.7Exports as % of sales 5.7 4.9 8.1 5.9 4.7

Source: Company, Siam

Mahindra and Mahindra: Sales volume

44.9

42.8

34.3 36

.3 39.9

38.0

45.2

36.7

36.7

36.1

34.7 35.6

42.8

15

20

25

30

35

40

45

50

55

Sep'

14

Oct'1

4

Nov

'14

Dec'

14

Jan'

15

Feb'

15

Mar

'15

Apr'1

5

May

'15

Jun'

15

Jul'1

5

Aug'

15

Sep'

15

(000

's)

Source: SIAM, ICICIdirect.com Research Mahindra and Mahindra: Tractor sales

28.7 31

.9

15.3

12.5 14

.9

11.4

12.3

18.0 19.3

25.1

15.5

11.7

18.1

0

5

10

15

20

25

30

35

40

Sep'

14

Oct'1

4

Nov

'14

Dec'1

4

Jan'

15

Feb'

15

Mar

'15

Apr'1

5

May

'15

Jun'

15

Jul'1

5

Aug'

15

Sep'

15

(000

's)

Source: SIAM, ICICIdirect.com Research

Ashok Leyland: Total sales

6.6

5.8

5.2 7.

2 8.0

8.2 10

.1

6.5 6.9 8.0 8.8

8.9 12

.1

2.5

2.5

2.5

2.1 2.

6 2.5

2.7

1.9 2.4 2.

4 2.2 2.6

2.6

0

2

4

6

8

10

12

14

16

Sep'

14

Oct'1

4

Nov

'14

Dec'

14

Jan'

15

Feb'

15

Mar

'15

Apr'1

5

May

'15

Jun'

15

Jul'1

5

Aug'

15

Sep'

15

(000

's)

M&HCV LCV



Page 11

Model Wise Volumes – September 2015

Exhibit 19: Top 10 passenger vehicle – Models sold in India (in units) S.No. Models Sep-14 Models Sep-15

1 Alto 19,906 Alto 20,658

2 Swift 17,265 Swift 18,278

3 DZIRES 16,964 DZIRES 16,453

4 Wagon R 15,641 Wagon R 14,912

5 Elite i20 8,902 Elite i20 11,744

6 Bolero 8,541 Grand i10 11,258

7 Grand i10 7,285 Celerio 8,901

8 Omni 6,659 Creta 7,256

9 Eon 6,489 Omni 6,694

10 Celerio 6,382 Amaze 6,577 Source: Siam

Exhibit 20: Top 10 two-wheelers – Models sold in India (in units) S.No. Models Sep-14 Models Sep-15

1 Splendor 234,844 Splendor 243,188

2 Activa 210,797 Activa 229,382

3 Passion 107,239 Passion 108,395

4 HF Deluxe 104,250 HF Deluxe 101,579

5 CB Shine 77,644 CB Shine 69,162

6 Discover 72,618 Pulsar 66,765

7 Dream 71,043 CT 59,406

8 TVS XL Super 69,233 Glamour 55,793

9 Pulsar 68,706 TVS XL Super 54,559

10 Glamour 51,831 Jupiter 48,866 Source: Siam


Page 12

News & views

• Maruti Suzuki has started pre-launch booking for its all-new premium hatchback “Baleno” from October 13, 2015. The car is likely to be launched by end October 2015. In another development, according to reports, MSIL’s recently launched “S-Cross” is being offered with incentives up to | 1 lakh, indicating the challenge in the acceptability of the vehicles at the launch price of | 8.34 lakh to | 13.74 lakh

• Hero MotoCorp has launched 110 cc scooters Maestro Edge and Duet,

which have been built on a completely new engine and chassis platform and is likely to help the company to increase its market share in the scooter segment, going forward. In another development, HMCL in the last 10 months of a tie-up with online market place Snapdeal, has sold 3 lakh motorcycles valued at | 1,500 crore.

• Mahindra & Mahindra (M&M) is planning to launch five more vehicles

in the automotive segment in FY16E. The company is planning to invest | 300 crore and | 200 crore in the 9-16 tonne category and 5-7 tonne category, respectively, for refreshing and developing new products, going forward

• Ashok Leyland has sold ~18 lakh shares of IndusInd Bank (its

investments) at an average price of | 919 share resulting in net proceeds of ~| 165.4 crore, which would be used towards repayment of its debt


Page 13

• ICICIdirect.com Research Universe (Auto & Auto ancillary)

CMP M Cap(|) TP(|) Rating (| Cr) FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E

Amara Raja (AMARAJ) 996 1050 Hold 17017 24.1 31.5 41.8 41.4 31.6 23.8 24.7 19.9 15.3 34.3 33.2 34.2 25.6 25.2 26.2Apollo Tyre (APOTYR) 191 228 Buy 9643 19.0 21.2 22.8 10.1 9.0 8.4 5.1 5.1 5.0 26.0 24.2 20.5 18.9 18.4 16.8Ashok Leyland (ASHLEY) 96 90 Hold 27120 1.2 3.2 5.1 81.6 29.7 18.8 27.2 13.9 10.4 7.2 17.2 23.5 6.5 16.1 21.5Bajaj Auto (BAAUTO) 2462 2526 Buy 71228 97.2 130.2 161.3 25.3 18.9 15.3 16.1 12.9 10.4 35.6 37.9 40.3 26.3 31.2 33.2Balkrishna Ind. (BALIND) 657 720 Hold 6354 50.6 55.7 58.5 13.5 12.3 11.7 8.2 7.7 6.6 17.8 17.7 19.0 21.3 17.8 17.7Bharat Forge (BHAFOR) 896 1294 Buy 20876 32.8 46.5 54.2 27.3 19.3 16.5 19.7 14.5 12.6 18.6 26.4 29.3 22.2 27.0 25.6Bosch (MICO) 21068 25000 Hold 66152 426.0 478.2 610.3 58.5 52.2 40.9 38.5 35.4 27.9 18.2 17.6 19.1 19.4 19.4 21.3Eicher Motors (EICMOT) 18287 20545 Hold 49392 227.1 562.1 708.1 80.5 32.5 25.8 49.1 21.9 17.1 24.5 43.7 41.2 24.5 41.7 37.7Escorts (ESCORT) 170 150 Hold 2028 6.7 17.5 25.6 23.2 8.9 6.0 12.5 6.1 3.5 4.5 10.1 13.6 4.4 10.0 13.0Exide Industries (EXIIND) 152 175 Buy 12929 6.4 7.6 8.9 23.7 19.9 17.1 13.8 11.5 9.7 18.9 20.6 21.8 13.5 14.5 15.4Hero Mototcorp (HERHON) 2584 2655 Hold 51602 119.5 153.8 177.0 21.6 16.8 14.6 13.6 15.2 14.0 45.9 48.3 46.0 36.5 38.7 37.3JK Tyre & Ind (JKIND) 106 150 Buy 2394 14.5 21.9 22.1 7.3 4.8 4.8 5.5 4.2 3.8 18.7 22.0 20.3 23.3 26.9 21.8M&M (MAHMAH) 1289 1525 Buy 76083 50.7 61.6 78.8 25.4 20.9 16.4 18.0 11.5 9.0 14.5 17.0 19.9 17.1 16.5 18.2Mahindra CIE (MAHAUT) 272 299 Buy 8771 -2.4 8.8 13.1 NA 30.7 20.7 22.7 13.5 10.8 -4.1 12.3 16.9 5.9 11.5 15.9Maruti Suzuki (MARUTI) 4450 4857 Buy 134487 122.9 179.9 220.8 36.2 24.7 20.2 19.2 13.7 11.2 17.2 23.3 23.6 15.6 19.4 20.1Motherson (MOTSUM) 252 347 Hold 33326 6.5 10.7 18.8 38.6 23.4 13.4 15.1 12.4 8.2 24.7 27.9 38.7 25.9 34.5 46.0Tata Motors (TELCO) 386 480 Buy 118270 41.2 40.5 52.5 8.5 8.7 6.7 3.4 3.3 2.6 22.8 14.8 16.3 24.9 13.8 15.2Wabco India (WABTVS) 7011 6080 Hold 13320 63.6 114.8 168.9 110.2 61.1 41.5 57.2 37.2 26.4 14.0 20.5 23.5 18.2 24.4 27.8

Sector / CompanyRoE (%)EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)

Source: ICICIdirect.com Research


Page 14

Exhibit 21: Auto raw material index

157

80100120140160180200220240

Mar

-09

Jun-

09Se

p-09

Dec-

09M

ar-1

0Ju

n-10

Sep-

10De

c-10

Mar

-11

Jun-

11Se

p-11

Dec-

11M

ar-1

2Ju

n-12

Sep-

12De

c-12

Mar

-13

Jun-

13Se

p-13

Dec-

13M

ar-1

4Ju

n-14

Sep-

14De

c-14

Mar

-15

Jun-

15Se

p-15

RM Auto Index

Source: Bloomberg, Reuters, Company, ICICIdirect.com Research

Exhibit 22: Currency movements

708090

100110120130140150160

Jul-1

1

Oct-1

1

Dec-

11

Mar

-12

Jun-

12

Aug

-12

Nov

-12

Jan-

13

Apr

-13

Jul-1

3

Sep-

13

Dec-

13

Mar

-14

May

-14

Aug

-14

Nov

-14

Jan-

15

Apr

-15

Jun-

15

Sep-

15

US$INR US$JPY US$EUR

Volatility in the currency markets is impacting raw material prices for companies with imported components and lower natural hedges.


The in-house raw material index reflects the combination of

various input materials (steel, rubber, aluminium, plastics)

for OEMs, which have February 2009 as base year at 100.

The chart shows a declining trend in raw material prices,

which is a positive for the industry


Page 15

RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Sector view: Over weight compared to index Equal weight compared to index Under weight compared to index Index here refers to BSE 500

Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai – 400 093

[email protected]


Page 16

ANALYST CERTIFICATION We /I, Nishit Zota, MBA (Finance) and Vidrum Mehta, MBA (Finance) research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

Terms & conditions and other disclosures: ICICI Securities Limited is a Sebi registered Research Analyst having registration no. INH000000990. ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com. ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. 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