November as expected saw a yoy surge in numbers on low base of last year’s November post DeMon. If we consider two wheeler sales, Hero, Bajaj and TVS all three reported strong 20-40% growth this month, while exports businesses have shown strong signs of revival this month. Bajaj and TVS both reported splendid exports numbers as we learned that Nigeria, one of the biggest exports markets for Indian two wheeler makers is back on track of revival. New geographies like Iran and Turkey have also provided the necessary impetus for Bajaj Auto. On the 3W business segment, new permits opening in Maharashtra and other states like Delhi and Karnataka have led to a surge in domestic 3W sales. On the PV side, MSIL still reported within its run rate of 10-15% growth based on strong order book for the new Dzire, Vitarra Brezza and Baleno. M&M, on the back of low base reported solid UV numbers. FES segment too outperformed this month with a 30%+ growth. ALL and TaMo both reported solid MHCV growth on low base. Even sequentially they reported good growth which signals intrinsic growth within the sector on infrastructural development and freight rates moving up. Escorts reported moderate growth.
Among the 2W pack, we like Hero (55% of rural volumes) which is a proxy to the rural story and is expected to pan out well on good monsoons, new launches, 7th Pay Commission and slurry of new launches as announced by the management though the valuations are a bit stretched. Bajaj Auto stock looks better on valuations but has been witnessing pressure in the domestic 2W markets on competition. However, since Q1, we are seeing the exports pressure reducing as the company enters newer markets, due to which we are optimistic on it too. TVS has been posting excellent sales performance but the double digit operating margins still look illusive, which is our major concern. We like MSIL on its sheer market leadership strength, new launches in the UV and the premium car segment, its image of a car made for India, solid distribution network and lesser impacted due to DeMon and BS III ban. With its recent new launches like Baleno, Vitarra Brezza, Supper Carry LCV and Ignis hatchback, we remain sanguine on MSIL. The upcoming launches of Baleno RS and new Swift coupled with new capacity at Gujarat coming up, we believe the volumes will touch higher orbit. We like Ashok Leyland as it’s a prime beneficiary of the CV cycle up move, which has already started to look up on expected good monsoons and infra cycle pick up. We are now getting bullish on M&M as the growth in FES segment will be supported by the expected growth in SUV business on upcoming launches in CY 18 and strong subsidiary valuation. Viewing the recovery in JLR numbers and strong domestic PV sales and recovering CV sales, we like Tata Motors. The most interesting driver for the industry will be the upcoming launches of the Electric Vehicles and the race for gaining market share in that segment. It can be anybody’s game…
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What started as one of India’s first securities brokerage houses in 1948 is today one of the country’s largest multi dimensional financial services group. LKP Securities is a Non Banking Finance Company (NBFC) registered with Reserve Bank of India & a listed public limited company having a networth of Rs.142 crores as on FY10. They are India's first financial group to be awarded the prestigious ISO 9002 certified KPMG Quality Registrar, USA, for certain businesses.
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