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Analyst Research Report Snapshot


MOSL: AUTO DASHBOARD - Monthly update for November 2013




Motilal Oswal Securities Ltd.


05 Dec 2013





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Auto Dashboard – November 2013 update Growth continues in two-wheelers and tractors, other segments sees sharp decline Scooters drive growth in two-wheelers; favorable monsoon continue to drive healthy tractor growth Growth in two-wheeler industry continues to be driven by the scooter segment as motorcycles and mopeds continues to remain weak. Favorable monsoon coupled with rise in minimum support prices continues to drive strong growth in the tractor industry. The decline in passenger vehicle has intensified with the end of festive season. Sharp drop in CV volumes continues reflecting continued challenges on the macro front. Easing of macro headwinds to be key catalyst for demand recovery With the expectation of an increase in rural incomes led by favorable monsoon coupled with election spending-led improvement in macro-economic factors, we hope for a better 2H for the auto sector. Over the long term, easing macro headwinds such as lower interest rates and higher economic growth would be the key driver for volume growth, profitability and in turn for re-rating. Valuation and view: Tata Motors, Hero MotoCorp and Eicher Motors are top picks Demand environment and changing competitive landscape in the auto sector would be the key determinants of stocks' performance. We are hopeful of a demand recovery in 2HFY14 driven by rural areas on favorable monsoon and consequent higher cash flows. We prefer Tata Motors (led by strong momentum in JLR) and Hero MotoCorp in large caps, and Eicher Motors in mid caps.

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