SECTOR UPDATE

05 OCT 2016

Autos
PV & 2Ws lead; CVs drag
TP Revision
Company

TP

Change

Reco

Maruti Suzuki
Eicher Motors

6,057
28,463

BUY
BUY

Ashok Leyland

91

BUY

Sneha Prashant
sneha.prashant@hdfcsec.com
+91-22-6171-7336
Abhishek Kumar Jain
abhishekkumar.jain@hdfcsec.com
+91-22-6171-7320
Navin Matta
navin.matta@hdfcsec.com
Rupin
Shah
+91-22-6171-7322
rupin.shah@hdfcsec.com
+91-22-6171-7337

Auto sales for Sep-16 were positive for 2Ws and PVs.
However, PV retails were lower owing to festive
season stocking and shradh. MSIL led the pack of PVs
followed by Tata Motors (strong demand for Tiago).
Rural demand revival and early festive season
inventory build-up aided healthy growth in scooters
and motorcycles. CV volumes were dismal again led
by higher base last year owing to pre-buying

(mandatory ABS in Oct-15). Eichers RE is proving to

be truly a cult brand spreading the bug across the
country. Re-iterate Buy. We see rural demand
strength and reiterate conviction on M&M, Maruti
and Atul Auto. Apart from OEMs, we believe auto
ancs like Suprajit and Lumax Auto will benefit from
strong traction in 2Ws/PVs.

PV: Upbeat domestic sales

MSIL reported highest-ever monthly sales led by
robust volumes across all segments.
Tata Motors is on a strong footing with Tiago
touching 40k bookings.
Rural demand pick up and good festive season could
drive strong demand in the coming months.

Domestic PV Sales For Major Players

2W: Onset of festive season and improving rural

sentiments spurts growth
2W players reported robust sales growth driven by
inventory stocking for the festive season and
improving rural sentiments.
Strong rural demand, launches in festive season and
implementation of 7th pay commission to drive
steady growth.

Domestic 2W Sales For Major Players

CV: High base and freight rates dragged MHCVs

Higher base last year led to MHCVs reporting degrowth again. LCVs picked up (+16% YoY) and we see
rural drivers here.
Given the laggard show by MHCVs, we have cut vols.
However, we are positive on the scrappage and BSIV
pre-buy effect.

Domestic CV Sales For Major Players

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

Sep-16 Sep-15
137,321 106,083
42,605
42,505
20,537
19,564
15,034
18,509
14,601
11,774
12,067
11,401
242,165 209,836

Company

% YoY Aug-15
29.4% 119,931
0.2%
43,201
5.0%
18,246
-18.8%
13,941
24.0%
13,002
5.8%
12,801
15.4% 221,122

% MoM
14.5%
-1.4%
12.6%
7.8%
12.3%
-5.7%
9.5%

Sep-16

Sep-15

% YoY

Hero Moto*

674,961

606,744

11.2%

616,424

9.5%

HMSI

539,662

411,643

31.1%

466,342

15.7%

TVS Motor

253,974

190,094

33.6%

238,984

6.3%

Bajaj Auto*

255,592

210,599

21.4%

200,314

27.6%

57,841

44,491

30.0%

55,721

3.8%

21.8% 1,577,785

12.9%

Royal Enfield
Total

1,782,030 1,463,571

Aug-15 % MoM

Company

Sep-16

Sep-15

% YoY

Aug-15

% MoM

Tata Motors

28,360

29,039

-2.3%

23,464

20.9%

Ashok Leyland #

12,057

14,771

-18.4%

10,897

10.6%

Eicher Motors #

4,734

4,047

17.0%

4,100

15.5%

45,151

47,857

-5.7%

38,461

17.4%

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

MSIL continues to clock

higher volumes month after
month. Domestic growth
was strong at 29% YoY as
demand for Brezza, Baleno
and Ciaz continues to be
strong

Entry segment reversed its

trend and clocked double
digit growth despite
competition from
incumbents like Renault
Kwid and Nissan Redi-go

Maruti Suzuki India (CMP Rs 5,681, Market Cap Rs 172tn, 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)

2016
44,395

Sep
2015 % Change
35,570
24.8%

FY17
207,659

YTD
FY16 % Change
215,788
-3.8%

50,324

44,826

12.3%

278,490

264,592

5.3%

3,973
6,544
105,236

3,229
4,291
87,916

23.0%
52.5%
19.7%

17,814
31,610
535,573

17,680
23,920
521,980

0.8%
32.1%
2.6%

18,423

6,331

191.0%

91,959

36,633

151.0%

13,618
44
137,321
11,822
149,143

11,836
106,083
7,676
113,759

15.1%
29.4%
54.0%
31.1%

77,755
69
705,356
61,543
766,899

70,350
628,963
65,701
694,664

10.5%
12.1%
-6.3%
10.4%

Ask rate for 6MFY17

Monthly
% YoY

127,780
11,425
139,205

13.3%
17.8%
13.7%

Source: Company, HDFC sec Inst Research

Domestic
160
140
120
100
80
60
40
20
0

Exports

Mix Remains Fairly Stable

YoY Growth

(in '000 units)

Revised TP upwards to Rs
6,057 to incorporate higher
volumes and realisation

Cars

40%

100%

30%

80%

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

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
Sep-16

Management is confident
of maintaining double digit
growth in FY17E

Highest-ever Monthly Sales

Source: Company, HDFC sec Inst Research

UVs

Vans

60%
40%
20%
0%

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
Sep-16

Retail volume growth were

lower than wholesale
(+16% YoY) owing to
inventory stocking at the
dealers end for the festive
season

Source: Company, HDFC sec Inst Research

Page | 2

AUTOS : SECTOR UPDATE

MHCV volumes fell sharply

led by subdued demand
and higher freight rates

M&Ms domestic tractor

sales rose 70% YoY aided by
strong rural sentiments
(owing to above normal
monsoon and expectation
of a strong festive season)

Auto Sales Volumes (In Units)

Particulars

2016
20,537
19,206
1,331
16,081
15,282
435
364
5,927
42,545
3,585
46,130

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)

Sep
2015 % Change
FY17
19,564
5.0% 1,15,499
18,717
2.6% 1,08,196
847
57.1%
7,303
14,430
11.4%
82,838
13,460
13.5%
76,202
459
-5.2%
4,029
511
-28.8%
2,607
4,483
32.2%
27,418
38,477
10.6% 2,25,755
3,155
13.6%
21,954
41,632
10.8% 2,47,709

YTD
Ask rate for 6MFY17
FY16 % Change Monthly
% YoY
1,01,697
13.6%
94,582
14.4%
7,115
2.6%
75,074
10.3%
69,394
9.8%
3,507
14.9%
2,173
20.0%
25,615
7.0%
2,02,386
11.5%
47,473
11.4%
18,681
17.5%
3,208
10.9%
2,21,067
12.1%
50,681
11.4%

Farm Equipment Segment Sales Volumes (In Units)

Particulars

2016
29,035
1,527
30,562

Domestic
Exports
Total Tractors (Dom + Exp)

Sep
2015
17,052
1,035
18,087

% Change
FY17
70.3% 1,29,463
47.5%
6,790
69.0% 1,36,253

YTD
Ask rate for 6MFY17
FY16 % Change Monthly
% YoY
1,01,226
27.9%
19,806
15.9%
6,378
6.5%
946
9.9%
1,07,604
26.6%
20,752
15.6%

Source: Company, HDFC sec Inst Research

Auto Segment Growth Was Muted

Auto
60

Tractor Sales Outperformance Continues

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%

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
Sep-16

LCV sales (< 3.5 T), mainly

representing pick-ups,
witnessed 14% YoY growth
owing to pick up in rural
demand

Mahindra & Mahindra (CMP Rs 1,444, Market Cap Rs 853bn, BUY)

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
Sep-16

M&Ms PV sales were

muted at 5% YoY. UVs grew
only by ~3% despite festive
inventory build up

Source: Company, HDFC sec Inst Research

Page | 3

AUTOS : SECTOR UPDATE

Bajaj Autos Sep-16

volumes were lower than
expected at 377k (-2% YoY)
led by 17% drop in exports

Bajaj Auto (CMP Rs 2,881, Market Cap Rs 834bn, NEUTRAL)

Strong domestic volumes

were led by Avenger, V-15
and new Platina

Motorcycles
3Ws
Total
Exports
Domestic

2016
331,976
44,789
376,765
121,173
255,592

Sep
2015
330,228
54,172
384,400
173,801
210,599

% Change
FY17
0.5% 1,769,954
-17.3%
256,724
-2.0% 2,026,678
-30.3%
748,666
21.4% 1,278,012

YTD
Ask rate for 6MFY17
FY16 % Change Monthly
% YoY
1,778,332
-0.5%
291,293
-11.9%
2,069,625
-2.1% 351,412
15.6%
996,645
-24.9% 135,254
9.3%
1,072,980
19.1% 216,158
20.0%

Source: Company, HDFC sec Inst Research

Domestic MC Volumes Surprised Positively

2W
500

3W

Exports Witness Sharp Fall Again

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%

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
Sep-16

With the onset of the

festival season and new
launches planned in 3Q
FY17 viz new Pulsar, new
400cc sports bike (compete
with RE), variant of V &
new launch in the entry
segment, domestic volumes
will drive growth in 2HFY17

Particulars

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
Sep-16

V15 clocked 30k while

CT+Platina clocked over
103k, owing to higher
volumes from the new
Platina stable.
Management is aiming at
40% market share in this
segment

Bajaj Sales Volumes (In Units)

Source: Company, HDFC sec Inst Research

Management expects
export volumes to remain
stable at ~120-125k in
2HFY17 (flat YoY)

Page | 4

AUTOS : SECTOR UPDATE

Positive rural sentiments

(good monsoon & 7th pay
commission) has translated
into robust volumes for
HMSI
With 1.2mn additional
capacity available, HMSI is
ensuring ready availability
of Activa for the first time
through the festive season
right upto the last mile
network

HMCL Sales Volumes (In Units)

Particulars

Sep
2015
606,744

2016
674,961

Total sales

YTD
Ask rate for 6MFY17
% Change
FY17
FY16 % Change Monthly
% YoY
11.2% 3,568,887 3,220,404
10.8%
620,255
9.1%

Source: Company, HDFC sec Inst Research

HMSI Sales Volumes (In Units)

Particulars

Sep
2015
264,408
147,227
19,089
430,724

2016
355,655
184,007
29,349
569,011

Scooters
Motorcycles
Exports
Total

YTD
% Change
34.5%
25.0%
53.7%
32.1%

FY17
1,798,374
875,171
136,479
2,810,024

FY16
1,403,052
767,172
101,890
2,272,114

% Change
28.2%
14.1%
33.9%
23.7%

Source: Company, HDFC sec Inst Research

Hero Posted Highest-ever Volumes

2W
800
700
600
500
400
300
200
100
0

HMSI Maintains Leadership In Scooters

2W

YoY Growth

(in '000 units)

Source: Company, HDFC sec Inst Research,

YoY Growth

(in '000 units)

40%

600

40%

30%

500

30%

20%

400

20%

10%

300

10%

0%

200

0%

-10%

100

-10%

-20%

-20%

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
Sep-16

Above normal monsoon has

lifted rural sentiments and
will give impetus to
volumes in 3Q. The festive
season will be better than
expected owing to 3 new
launches lined up (Achiever
150cc, Super Splendor,
Passion Pro)

Hero MotoCorp (CMP Rs 3,521, Market Cap Rs 703bn, BUY)

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
Sep-16

HMCL broke the previous

month record to clock
highest-ever volumes in
Sep-16 at 675k (11% YoY).
This was backed by new
launch of Splendor iSmart
110 and strong demand for
Glamour (125cc market
leader) and scooters

Source: Company, HDFC sec Inst Research

Page | 5

AUTOS : SECTOR UPDATE

Ashok Leyland (CMP Rs 81, Market Cap Rs 232bn, Buy)

ALs MHCV sales declined
26% YoY owing to higher
base last year
(implementation of ABS in
Cot-15)

AL Sales Volumes (In Units)

Particulars

2016
8,963
3,094
12,057

MHCV
LCV
Total sales

Sep
2015
12,134
2,637
14,771

% Change
-26.1%
17.3%
-18.4%

FY17
49,371
15,238
64,609

YTD
FY16
51,357
14,198
65,555

% Change
-3.9%
7.3%
-1.4%

Ask rate for 6MFY17

Monthly
% YoY
11,244
15.5%
3,139
14.2%
14,383
15.2%

Source: Company, HDFC sec Inst Research

Weak MHCV Vols For Third Consecutive Month

MHCV
14.0

YoY Growth

(in '000 units)

12.0
10.0
8.0
6.0
4.0
2.0
0.0

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
Sep-16

Given weak MHCV volumes

over the past few months,
we have cut our volume
guidance for FY17 and thus
our revised TP stands at Rs
91. However, an upside risk
exists in the form of higher
volumes from pre-buying in
4Q (ahead of BSIV
implementation) and
scrappage policy

LCV Witnessed Strong Growth

Source: Company, HDFC sec Inst Research

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

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%

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
Sep-16

LCV segment reported a

strong performance led by
positive rural sentiments

Source: Company, HDFC sec Inst Research

Page | 6

AUTOS : SECTOR UPDATE

Eicher Motors (CMP Rs 25,842, Market Cap Rs 700bn, BUY)

LMD segment growth (+8%)

was driven by new launch
of Eicher Pro 1049 (sub 5
tonne category)
While other incumbent
players are losing share,
Eicher is gaining market
share in the HD segment

Eicher Sales Volumes (In Units)

Particulars

2016
2,747
938
1,049
4,775
57,841

LMD
HD
Buses
Total ETB
Royal Enfield

Sep
2015
2,554
857
636
4,047
44,491

ETB Outperformed Industry

Total ETB

YTD
FY16
12,072
4,389
6,712
19,562
234,224

% Change
20.6%
51.0%
17.3%
27.8%
34.2%

Ask rate for 6MFY17

Monthly
% YoY

5,826
57,106

24.5%
25.1%

RE Vols Going Strong

YoY Growth

7,000

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

5,000

With strong
outperformance over the
last few months in both
segments, we re-iterate
BUY on Eicher and revise
our volume estimates and
TP. Revise TP to Rs 28,463

FY17
14,560
6,628
7,875
25,004
314,423

Source: Company, HDFC sec Inst Research

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

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
Sep-16

RE recorded highest ever

volumes owing to sustained
demand for leisure bikes
and higher penetration in
new markets

% Change
7.6%
9.5%
64.9%
18.0%
30.0%

Source: Company, HDFC sec Inst Research

70.0

YoY Growth

(in '000 units)

60.0
50.0
40.0
30.0
20.0
10.0
-

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

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
Sep-16

Eichers ETB division

outperformed the industry
at 18% YoY growth led by
strong demand in the bus
segment (+65%)

Source: Company, HDFC sec Inst Research

Page | 7

AUTOS : SECTOR UPDATE

MHCVs volumes were

disappointing on account of
higher base last year (prebuying due to mandatory
implementation of ABS in
Oct-15)

Tata Motors (CMP Rs 550, Market Cap Rs 187tn, BUY)

TTMT Sales Volumes (In Units)
Particulars
LCV
MHCV
Commercial Vehicles
Passenger Vehicles
Exports
Total

Exports were stronger at

29% on account of higher
CV sales

% Change
19.0%
-19.9%
-2.3%
24.0%
29.2%
7.6%

FY17
84,804
69,590
154,394
58,515
31,469
244,378

YTD
FY16
78,480
71,799
150,279
64,889
28,201
243,369

% Change
8.1%
-3.1%
2.7%
-9.8%
11.6%
0.4%

Ask rate for 6MFY17

Monthly
% YoY

33,043
14,598
5,529
53,170

11.7%
43.5%
11.4%
18.9%

Source: Company, HDFC sec Inst Research

MHCVs Fall On High Base

MHCV
20.0

LCVs Gaining Strength On A Low Base

YoY Growth

(in '000 units)

15.0
10.0

LCV
80%
60%

20.0

40%

15.0

0%

10.0

-10%

0%

5.0
0.0

Source: Company, HDFC sec Inst Research

YoY Growth

25.0

20%

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
Sep-16

PV segment is going strong

with strong demand for
Tiago. As per channel
checks, Tiago has a waiting
period of three months and
bookings so far stand at
40k

2016
15,618
12,742
28,360
14,601
5,687
48,648

Sep
2015
13,124
15,915
29,039
11,774
4,402
45,215

-20%

5.0

-40%

0.0

(in '000 units)

30%
20%
10%

-20%
-30%
-40%

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
Sep-16

Tata Motors reported sharp

de-growth in MHCV volume
for the fourth consecutive
month of 19% YoY. LCV
sales continued its strong
show with 19% YoY growth

Source: Company, HDFC sec Inst Research

Page | 8

AUTOS : SECTOR UPDATE

SML Isuzu (CMP Rs 1,245, Market Cap Rs 18bn, BUY)

SML reported de-growth of
5% YoY led by marginal
moderation in CNG vehicle
sales

SML Sales Volumes (In Units)

Particulars

2016
977

Total sales

Sep
2015
1,032

% Change
-5.3%

FY17
8,320

YTD
FY16
6,910

% Change
20.4%

Ask rate for 6MFY17

Monthly
% YoY
1,131
17.2%

Source: Company, HDFC sec Inst Research

SML Volumes Lower

Total sales

YoY Growth

2500

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

2000
1500
1000
500
0

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
Sep-16

We reckon that with

removal of ban on diesel
vehicles in NCR brought
down sales of CNG vehicles
over the last two months
and thus volumes were
lower for SML

Source: Company, HDFC sec Inst Research

Page | 9

AUTOS : SECTOR UPDATE

Atul Auto (CMP Rs 492, Market Cap Rs 11bn, BUY)

Atul Auto reported 9% YoY
growth (marginally higher
than our estimates)

ATA Sales Volumes (In Units)

Particulars

2016
4,666

Total Sales

Aug
2015
4,302

% Change
8.5%

FY17
19,367

YTD
FY16
20,763

% Change
-6.7%

Ask rate for 6MFY17

Monthly
% YoY
4,456
15.6%

Source: Company, HDFC sec Inst Research

AALs Monthly Volume Trend

(in '000 units)

Atul Auto

Major 3W OEMs Volume Trend*

Bajaj Auto

YoY Growth
40%

20%

0%

-20%

-40%

10

-60%

Source: Company, HDFC sec Inst Research

TVS Motor

Atul Auto

60

50
40
30
20

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
Sep-16

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
Sep-16

However, for 1HFY17,

volumes were lower by 7%
on account of various issues
(VAT, lower rainfall in
Gujarat in the initial
months and selective
change in dealer payment
structure)

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

232
11
837
700
42
706
836
1,716
18

81
492
2,894
25,842
3,188
3,534
1,415
5,680
1,245

BUY
BUY
NEU
BUY
BUY
BUY
BUY
BUY
BUY

91
569
2,716
28,463
4,170
3,731
1,615
5,318
1,588

Adj EPS (Rs/sh)

FY16 FY17E FY18E
3.9
4.2
6.2
21.6
26.0
32.3
126.2 139.4 157.1
587.1 672.5 894.4
137.1 163.7 187.1
156.8 180.6 214.8
55.5
69.8
88.3
153.9 205.4 268.9
25.5
35.4
53.6

FY16
20.8
22.8
22.9
44.0
23.3
22.5
25.5
36.9
48.8

P/E (x)
FY17E
19.4
18.9
20.8
38.4
19.5
19.6
20.3
27.7
35.2

FY18E
13.2
15.2
18.4
28.9
17.0
16.5
16.0
21.1
23.2

EV/EBITDA (x)
FY16 FY17E FY18E
11.2
10.7
7.9
14.0
11.2
8.9
15.6
13.9
12.0
24.8
21.7
16.3
14.2
12.1
9.4
15.1
12.8
10.5
15.2
12.4
9.8
18.8
16.8
13.2
26.5
21.5
14.9

FY16
20.9
34.4
31.8
41.0
12.8
43.1
15.6
18.3
12.8

RoE (%)
FY17E FY18E
20.5
26.7
32.6
32.3
17.9
30.8
41.5
40.1
13.6
14.6
41.3
41.9
17.5
19.8
21.2
23.7
15.9
21.0

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 2QFY17
500
493
1,572
1,620
1,718
1,873
46
46
13,215 13,502

% 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 2QFY17
13.2
(1.4)
3.8
3.0
(1.3)
9.1
33.4
(0.4)
32.3
2.2

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 2QFY17
66.92
66.96
75.56
74.76
96.08
88.01
1.13
1.12
1.44
1.31
107.97 102.37
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 2QFY17
(0.9)
0.1
1.5
(1.1)
(0.6)
(8.4)
2.4
(1.1)
0.3
(8.5)
(6.3)
(5.2)
5.9
5.5

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