Analyst Research Report Snapshot

Title:

Spark Capital - Sep 2013 'Auto'psy: Festive season drives pick-up in truck rentals; diesel-petrol mix remains stable in PCs

Price:

$184.00

Provider:

Spark Capital Advisors(India) Private Limited

Date:

22 Oct 2013

Pages:

18

Type:

AcrobatPDF

Companies referenced:

BAJA.NS ASOK.NS HROM.NS MAHM.NS MRTI.NS TAMO.NS TVSM.NS WABC.NS

Available for Immediate Download
Summary:

Festive season drives pick-up in truck rentals; diesel-petrol mix remains stable in PCs Truck rentals which improved in the first week of October for the festive season have since been stable with the recent diesel price hike yet to be reflected. Rentals have not breached the lows seen in Sep 2012 in any subsequent month since. While this stability is a positive signal, diesel prices are up 12% in the same period indicating continued pressures on profitability. The spike in rentals in the first week of October was driven by increased arrivals of fruits and vegetables and better factory output. Post the recent Rs 3.6 per litre reduction in petrol price and the Rs 0.50 per litre hike in diesel prices the fuel price differential has narrowed 9ppts after peaking in September at 46% (21ppt higher than May 2013 trough of 26%). We believe petrol diesel sales mix for cars will stabilize after the volatility in the price differential reduces. Ertiga saw a sharp decline in the diesel mix to 48% during the month, however we see this as a one off rather than a trend given that other models have been fairly stable and expect a recovery going forward. M&HCV volumes declined 41% driven by a 30% decline in Passenger Carriers and a 44% decline in the goods segment. The ICV segment posted a decline in excess of 30% for the second month in a row after a relatively modest decline from Apr-Jul. LCV volumes declined 18% yoy with the small commercial vehicle demand weakening. Volumes in the sub 2 tonne segment declined 34%. Growth has steadily decelerated in the 2 to 3.5 ton segment to 4% due to a high base. M&M continues to gain market share with the Genio and Bolero-Pickups (YTD growth of 19%). Tata Motors has also had significant traction in the Super Ace portfolio although volumes declined 1% in September on a high base. Tata and M&M have gained market share of 550bps and 115bps YTD while Ashok Leyland has lost ~550bps of market share within the 2 to 3.5 ton segment of LCVs. Motorcycle volumes were up 17% yoy on a low base driven by a 15% growth in despatches from Hero MotoCorp. We expect Hero’s despatches to be sequentially strong given the new product launches. The new products are scheduled to be launched first in Northern India and towards January 2014 in the Southern parts of the country. Honda (HMSI) grew 40% yoy driven by the continuing production ramp-up. According to our channel checks, while retail sales are strong for HMSI’s Shine and Unicorn the sales of the Dream series are so far being driven by supplying stocks to dealers. TVS Motor also saw a strong yoy growth of 31% driven by Phoenix which was launched in November 2012. September and October are seasonally the strongest months for the TVS Star which posted a sequential volume increase of ~16,300 units (yoy growth of 6%). Scooter volumes grew 25% with ~1/3rd of the growth coming from new products (~7,400 units of TVS Jupiter and ~13,000 additional units from Yamaha Ray). Other growth drivers were the ramp-up at HMSI with Activa posting a growth of 35% and HMCL’s Maestro which grew 69% on a lower base. We expect volume’s for HMCL’s Pleasure to improve in 2HFY14 post the recent face-lift.

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