MUMBAI: Motilal Oswal Securities has maintained ‘buy’ on Maruti Suzuki. The company reported growth of 1.3 per cent in February 2008 sales to 63,822 units. Domestic volume growth was flat at 0.4 per cent; volumes were 59,311 units. However, export growth momentum remained robust, as sales increased 15.5 per cent year on year to 4,511 units.
During February 2008, sales growth in most segments was negative, except for the volume driver A2 segment (plus 2.7 per cent year on year) and the A3 segment (plus 8.9 per cent year on year).
Motilal believes that the lower domestic growth was due to postponement of purchases following expectations of excise duty reduction in Budget 2008. The brokerage expects strong volume growth from March 2008 onwards, boosted by the excise duty reduction from 16 per cent to 12 per cent on small cars (constituting 77 per cent of MSIL’s product portfolio).
Motilal believes that the reduction in the excise duty may lead to volume upgrades due to robust domestic demand. Currently, the brokerage expects MSIL to register volume growth of 16.1 per cent in 2008-09 and 16.5 per cent in 2009-10. The stock trades at 13.1x FY08E EPS of Rs 66.7, 11.4x
FY09E EPS of Rs 76.8 and 9.9x FY10E EPS of Rs 88.6.
Motilal estimates that the price reduction would average Rs 10,120 per car for MSIL.
Mahindra & Mahindra
Motilal has maintained ‘buy’ on the stock. M&M reported volume increase of 13 per cent year on year in February 2008 to 23,446 units (excluding Logan). Inclusive of Logan sales, volumes have increased 26.3 per cent year on year.
UV sales growth recovered strongly after two consecutive weak months in December and January, increasing 39.1 per cent year on year to 13,858 units. Scorpio sales increased by 28 per cent, non-Scorpio UVs by 34 per cent and exports by 170 per cent.
In passenger cars, Logan sales were also impressive at 2,751 units (plus 19.6 per cent month on month). However, tractor sales continued to disappoint, declining by 6.9 per cent year on year to 6,522 units; both domestic sales and exports declined by 7 per cent each. Three-wheeler volumes were also disappointing, declining by 22.8 per cent year on year to 2,347 units.
With several growth drivers for the company over the next few years coupled with attractive valuations, Motilal remains positive on M&M. The brokerage expects volume growth of 7.5 per cent and 6 per cent in 2008-09 and 2009-10 respectively for tractors, and 11 per cent and 10 per cent in 2008-09 and 2009-10 respectively in UVs.
While the agriculture sector growth is expected to be lower at 2.6 per cent in 2007-08, Motilal believes that the budget offers positives for the sector in terms of increased agricultural credit (Rs 2,400 billion by March 2008, target of Rs 2,800 billion by 2008-09) progress in Bharat Nirman, focus on water resources, and the debt waiver and debt relief scheme for farmers.
This is positive for tractor companies like M&M and Punjab Tractors. Their tractor volumes may see an upside from the continued agricultural and rural sector focus seen in the recent budget. The stock trades at 10.9x FY08E EPS of Rs 62.5, 9.2x FY09E EPS of Rs 74.7 and 7.9x FY10E EPS of Rs 86.9.
Tata Motors
Motilal has maintained ‘buy’ on the stock. Tata Motors reported total volumes of 54,181 vehicles for the month of Feb (plus 0.9 per cent year on year but lower 1.1 per cent month on month). Medium and Heavy Commercial Vehicles volumes were robust at 17,814 units (plus 0.6 per cent year on year and plus 7.9 per cent month on month); these are the highest monthly M&HCV sales in 2007-08.
Domestic M&HCV sales growth was also higher at 3.6 per cent year on year. Light commercial vehicles continued to witness robust volumes,
increasing by 29.5 per cent year on year, domestic LCV growth was 25 per cent. Total domestic commercial portfolio grew 12.8 per cent year on year in February 2008.
Passenger cars declined 19.4 per cent year on year, while UV sales were higher by merely 0.7 per cent year on year. The growth rate in passenger cars may have been impacted due to budget expectation of an excise duty cut. Tata Motors has announced price reductions in the range of Rs 8,500 - 15,300 on the Indica and Indigo CS after the Budget.
Motilal expects the passenger car industry to register a healthy growth rate in the coming months due to incremental demand from lower excise duty rates and increased disposable incomes following reduction in personal tax rates and higher slabs. The stock trades at 13.4x FY08E EPS of Rs 51.9, 11.6x FY09E EPS of Rs 59.6 and 10.3x FY10 EPS of Rs 67.4.
Bajaj Auto
Motilal has maintained ‘buy’ on the stock. Bajaj Auto reported volume decline of 9.1 per cent year on year in February 2008 to 183,807 units, with
disappointing volumes in all the segments. Motorcycle volumes declined by 7.6 per cent year on year to 158,662 units, while three wheelers sales were lower by 13.2 per cent year on year to 24,299 units.
However, export growth was robust at 65 per cent year on year to 63,182 units. The company has stated that 3-wheeler demand is lower due to poor domestic demand, but exports are expected to compensate for volumes. In motorcycles, the company has seen strong sales in its +125cc portfolio comprising of XCD, Discover, Avenger and Pulsar.
The company estimates that the 100cc saw a 13 per cent decline in volumes, while sales in the +125cc segment were stable, leading to a decline of 10 per cent in the motorcycle industry. The management has given guidance of positive overall growth for 2008-09 owing to the twin focus on bigger motorcycles and international markets.
Motilal believes that the lower domestic growth may be partially due to postponement of purchases following expectations of excise duty reduction in Budget 2008. The brokerage expects volumes to be boosted by the excise
duty reduction from 16 per cent to 12 per cent and it expects volume growth of 10 per cent in 2008-09 and 8 per cent in 2009-10 in motorcycles.
Motilal believes that the reduction in the excise duty may lead to volume upgrades due to robust domestic demand, thereby providing an upside to their estimates. The brokerage has lowered their volume estimate for BAL in 2007-08 and expects motorcycle volume decline of 8 per cent in 2007-08 (previous estimate decline of 5.5 per cent. EPS estimates stand reduced by 1.5 per cent and 0.9 per cent respectively for 2007-08 and 2008-09. The stock trades at 17.5x FY08E EPS of Rs 128.9, 14.9x FY09E EPS of Rs 151.1 and 13.4x FY10E EPS of Rs 167.7.
Hero Honda
Motilal has maintained ‘buy’ on the stock. Hero Honda has reported a volume decline of 5.4 per cent year on year in its sales for February 2008 to 265,431 units. Sales in YTD 2007-08 have declined marginally by 1.4 per cent year on year.
Hero Honda has announced a price decline in the range of Rs 1,000-2,400 after the excise duty cut in the budget. The company has said that it expects sales to improve post the reduction in the excise duty, and has passed on the entire benefit of the duty reduction to the customers.
Motilal expects volume growth of 8.6 per cent in 2008-09 and 8.1 per cent in 2009-10. A positive response to the lower excise duty rate may result in an upside to the brokerage volumes estimates for 2008-09 and 2009-10, while further extension of the credit squeeze provide a downside risk to the same. The stock trades at 16.7x FY08E EPS of Rs 46.2, 14.6x FY09E EPS of Rs 53.1 and 13.2x FY10E EPS of Rs 58.4.
TVS Motors
Motilal has maintained ‘neutral’ on the stock. TVS Motors reported 20.7 per cent year on year decline in its February 2008 sales to 95,235 units. The decline was again led by lower motorcycle sales (-34 per cent year on year) to 46,565 units. However, on a month on month basis, motorcycle sales increased by 19 per cent.
Scooter sales declined 29 per cent year on year to 14,126 units. However, moped sales were robust at 34,544 units ( plus 15.1 per cent year on year). Exports increased by a robust 56.2 per cent to 12,523 units.
TVS plans to relaunch the much delayed Flame with a new engine this month; this might provide respite to the declining motorcycle volumes. The management has reiterated that its volumes have been negatively impacted by restricted availability of retail finance, high interest rates, stringent norms being followed by financers and non-availability of the 125cc Flame due to legal reasons. The stock trades at 16.5x FY09E EPS of Rs 2.6 and 13.1x FY10E EPS of Rs 3.2.
During February 2008, sales growth in most segments was negative, except for the volume driver A2 segment (plus 2.7 per cent year on year) and the A3 segment (plus 8.9 per cent year on year).
Motilal believes that the lower domestic growth was due to postponement of purchases following expectations of excise duty reduction in Budget 2008. The brokerage expects strong volume growth from March 2008 onwards, boosted by the excise duty reduction from 16 per cent to 12 per cent on small cars (constituting 77 per cent of MSIL’s product portfolio).
Motilal believes that the reduction in the excise duty may lead to volume upgrades due to robust domestic demand. Currently, the brokerage expects MSIL to register volume growth of 16.1 per cent in 2008-09 and 16.5 per cent in 2009-10. The stock trades at 13.1x FY08E EPS of Rs 66.7, 11.4x
FY09E EPS of Rs 76.8 and 9.9x FY10E EPS of Rs 88.6.
Motilal estimates that the price reduction would average Rs 10,120 per car for MSIL.
Mahindra & Mahindra
Motilal has maintained ‘buy’ on the stock. M&M reported volume increase of 13 per cent year on year in February 2008 to 23,446 units (excluding Logan). Inclusive of Logan sales, volumes have increased 26.3 per cent year on year.
UV sales growth recovered strongly after two consecutive weak months in December and January, increasing 39.1 per cent year on year to 13,858 units. Scorpio sales increased by 28 per cent, non-Scorpio UVs by 34 per cent and exports by 170 per cent.
In passenger cars, Logan sales were also impressive at 2,751 units (plus 19.6 per cent month on month). However, tractor sales continued to disappoint, declining by 6.9 per cent year on year to 6,522 units; both domestic sales and exports declined by 7 per cent each. Three-wheeler volumes were also disappointing, declining by 22.8 per cent year on year to 2,347 units.
With several growth drivers for the company over the next few years coupled with attractive valuations, Motilal remains positive on M&M. The brokerage expects volume growth of 7.5 per cent and 6 per cent in 2008-09 and 2009-10 respectively for tractors, and 11 per cent and 10 per cent in 2008-09 and 2009-10 respectively in UVs.
While the agriculture sector growth is expected to be lower at 2.6 per cent in 2007-08, Motilal believes that the budget offers positives for the sector in terms of increased agricultural credit (Rs 2,400 billion by March 2008, target of Rs 2,800 billion by 2008-09) progress in Bharat Nirman, focus on water resources, and the debt waiver and debt relief scheme for farmers.
This is positive for tractor companies like M&M and Punjab Tractors. Their tractor volumes may see an upside from the continued agricultural and rural sector focus seen in the recent budget. The stock trades at 10.9x FY08E EPS of Rs 62.5, 9.2x FY09E EPS of Rs 74.7 and 7.9x FY10E EPS of Rs 86.9.
Tata Motors
Motilal has maintained ‘buy’ on the stock. Tata Motors reported total volumes of 54,181 vehicles for the month of Feb (plus 0.9 per cent year on year but lower 1.1 per cent month on month). Medium and Heavy Commercial Vehicles volumes were robust at 17,814 units (plus 0.6 per cent year on year and plus 7.9 per cent month on month); these are the highest monthly M&HCV sales in 2007-08.
Domestic M&HCV sales growth was also higher at 3.6 per cent year on year. Light commercial vehicles continued to witness robust volumes,
increasing by 29.5 per cent year on year, domestic LCV growth was 25 per cent. Total domestic commercial portfolio grew 12.8 per cent year on year in February 2008.
Passenger cars declined 19.4 per cent year on year, while UV sales were higher by merely 0.7 per cent year on year. The growth rate in passenger cars may have been impacted due to budget expectation of an excise duty cut. Tata Motors has announced price reductions in the range of Rs 8,500 - 15,300 on the Indica and Indigo CS after the Budget.
Motilal expects the passenger car industry to register a healthy growth rate in the coming months due to incremental demand from lower excise duty rates and increased disposable incomes following reduction in personal tax rates and higher slabs. The stock trades at 13.4x FY08E EPS of Rs 51.9, 11.6x FY09E EPS of Rs 59.6 and 10.3x FY10 EPS of Rs 67.4.
Bajaj Auto
Motilal has maintained ‘buy’ on the stock. Bajaj Auto reported volume decline of 9.1 per cent year on year in February 2008 to 183,807 units, with
disappointing volumes in all the segments. Motorcycle volumes declined by 7.6 per cent year on year to 158,662 units, while three wheelers sales were lower by 13.2 per cent year on year to 24,299 units.
However, export growth was robust at 65 per cent year on year to 63,182 units. The company has stated that 3-wheeler demand is lower due to poor domestic demand, but exports are expected to compensate for volumes. In motorcycles, the company has seen strong sales in its +125cc portfolio comprising of XCD, Discover, Avenger and Pulsar.
The company estimates that the 100cc saw a 13 per cent decline in volumes, while sales in the +125cc segment were stable, leading to a decline of 10 per cent in the motorcycle industry. The management has given guidance of positive overall growth for 2008-09 owing to the twin focus on bigger motorcycles and international markets.
Motilal believes that the lower domestic growth may be partially due to postponement of purchases following expectations of excise duty reduction in Budget 2008. The brokerage expects volumes to be boosted by the excise
duty reduction from 16 per cent to 12 per cent and it expects volume growth of 10 per cent in 2008-09 and 8 per cent in 2009-10 in motorcycles.
Motilal believes that the reduction in the excise duty may lead to volume upgrades due to robust domestic demand, thereby providing an upside to their estimates. The brokerage has lowered their volume estimate for BAL in 2007-08 and expects motorcycle volume decline of 8 per cent in 2007-08 (previous estimate decline of 5.5 per cent. EPS estimates stand reduced by 1.5 per cent and 0.9 per cent respectively for 2007-08 and 2008-09. The stock trades at 17.5x FY08E EPS of Rs 128.9, 14.9x FY09E EPS of Rs 151.1 and 13.4x FY10E EPS of Rs 167.7.
Hero Honda
Motilal has maintained ‘buy’ on the stock. Hero Honda has reported a volume decline of 5.4 per cent year on year in its sales for February 2008 to 265,431 units. Sales in YTD 2007-08 have declined marginally by 1.4 per cent year on year.
Hero Honda has announced a price decline in the range of Rs 1,000-2,400 after the excise duty cut in the budget. The company has said that it expects sales to improve post the reduction in the excise duty, and has passed on the entire benefit of the duty reduction to the customers.
Motilal expects volume growth of 8.6 per cent in 2008-09 and 8.1 per cent in 2009-10. A positive response to the lower excise duty rate may result in an upside to the brokerage volumes estimates for 2008-09 and 2009-10, while further extension of the credit squeeze provide a downside risk to the same. The stock trades at 16.7x FY08E EPS of Rs 46.2, 14.6x FY09E EPS of Rs 53.1 and 13.2x FY10E EPS of Rs 58.4.
TVS Motors
Motilal has maintained ‘neutral’ on the stock. TVS Motors reported 20.7 per cent year on year decline in its February 2008 sales to 95,235 units. The decline was again led by lower motorcycle sales (-34 per cent year on year) to 46,565 units. However, on a month on month basis, motorcycle sales increased by 19 per cent.
Scooter sales declined 29 per cent year on year to 14,126 units. However, moped sales were robust at 34,544 units ( plus 15.1 per cent year on year). Exports increased by a robust 56.2 per cent to 12,523 units.
TVS plans to relaunch the much delayed Flame with a new engine this month; this might provide respite to the declining motorcycle volumes. The management has reiterated that its volumes have been negatively impacted by restricted availability of retail finance, high interest rates, stringent norms being followed by financers and non-availability of the 125cc Flame due to legal reasons. The stock trades at 16.5x FY09E EPS of Rs 2.6 and 13.1x FY10E EPS of Rs 3.2.
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