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Auto-Roundup December 2017 - IndiaNotes.com
Auto-Roundup December 2017
LKP Securities | Published: 02 Jan, 2018  | Source : IndiaNotes.com

Strong set of numbers


December  is seasonally a weak month for auto sales wherein customers postpone their buying in order to get a new year of registration  for their vehicles. Also some companies undertake  maintenance  shutdown  in  this  month  which  impacts  production,  thus  sales.  However,  December  2017  has  been  an  exceptional  month  wherein  most  of  the  auto  companies have bucked the trend and reported robust set of numbers.  This has been on the back of weak base post DeMon  last year  and overall pick  up in the auto sector with economic revival.  


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 impetu s 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. Even in the exports markets revival in African markets is leading to good 3W numbers. 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 other hand has reported weak set of numbers in the UV business as there has been no new launch off late to tackle competition. FES segment 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  core sector reporting good set of numbers.


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  DeMonand BS III ban. With its recent new launches like Baleno, Vitarra Brezza, Super Carry LCV and Ignis hatchback, we remain sanguine on MSIL. However, on valuation front it looks quite expensive to buy at these levels.  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.  FES segment  and strong subsidiary valuation  will assist M&M to grow well from these levels, though UVs will disappoint on and off till new launches arrive..


Viewing the  recovery in JLR  numbers and strong domestic  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 in the coming years.… Dec-17  Nov-17  %

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About LKP Securities

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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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.