Sector Update

| 2 December
2014
Automobiles
| Update

Automobiles
CMP: INR3,390

TP: INR4,800

Buy

Nov-14 above estimate, with ~19.5% YoY growth

Bloomberg

MSIL IN

Equity Shares (m)

M.Cap. (INR b) / (USD b)

1024/16.5

52-Week Range (INR)

3432/1541

1, 6, 12 Rel. Per (%)

0/28/21

Financial & Valuations (INR b)

Y/E Mar
2015E 2016E 2017E
Sales

Strong growth in Vans and Compact segment

302.1

514.3 625.1

749.0

EBITDA

66.2

90.7

114.3

Adj. PAT

38.2

54.8

71.6

Adj EPS,INR#

129

184

240

EPS Gr. (%)

36.8

42.5

30.1

BV/Sh. (INR)

798

944

1,138

RoE (%)

15.9

19.2

20.8

RoCE (%)

18.4

23.1

25.4

Payout (%)

18.4

19.2

18.4

P/E (x)

26.2

18.4

14.1

P/CE (x)

16.2

12.3

9.9

EV/EBITDA (x)

13.9

9.7

7.2

Div. Yield (%)

0.6

0.9

1.1

Valuations

Nov-14 volumes grew by 19.5% YoY (flat MoM) to ~110,147 units (v/s est 98,000
units), driven by ~17% growth in domestic volumes and ~53% growth in exports. We
estimate ~14.4% growth in FY15, implying ~17% residual growth or ~121,336 residual
run-rate.
Domestic volumes grew 17% YoY to ~100,024 units (v/s est 90k). We estimate ~14.4%
growth in FY15 in domestic volumes implying 16.7% residual growth or ~112k/month
of run-rate.
Compact segment (Alto, Wagon-R, Swift, Celerio, Ritz etc) grew by ~16% YoY to
~63,074 units (v/s est 55,770 units).
Sedan (A3) segment saw a healthy growth of 24% YoY to 19,232 units (v/s est 20,132
units), driven by Ciaz which saw volumes of 5,232 units. Dzire volumes have de-grown
YoY, impacted by launch of new Swift.
UV segment (Ertiga) de-grew by 6% YoY to 5,515 units (v/s est 5,678 units), on high
base of last year.
The management has guided for ~10% growth for FY15, implying residual volume
growth of ~4.5% or ~108.7k units. We believe volume momentum at ground level will
pick-up further with several new launches of MSIL, including Ciaz, refreshed Swift, Alto
K-10 (with AMT) and refreshed Dzire (in 4QFY15).
We estimate EPS of ~INR129/INR184/INR240 for FY15/16/FY17. The stock trades at
18.4x/14.1x FY16E/17E consolidated EPS. Maintain Buy.

#Consol

Snapshot of volumes for November 2014

Total volume
Domestic
C (Vans)
A2 (Compacts)
A3 (Sedan)
UV (Ertiga)
Export

Nov-14

Nov-13

110,147
100,024
12,203
63,074
19,232
5,515
10,123

92,140
85,510
8,021
54,408
15,486
5,840
6,630

YoY
MoM
(%) Oct-14
FY15-YTD
(%) chg
chg
19.5 109,742
0.4
109,742
17.0 99,290
0.7
99,290
52.1 11,863
2.9
11,863
15.9 61,887
1.9
61,887
24.2 19,560
-1.7
19,560
-5.6
5,980
-7.8
5,980
52.7 10,452
-3.1
10,452

(%)
chg

FY15
estimate

Chg
(%)

0.4
0.7
2.9
1.9
-1.7
-7.8
-3.1

835,912
755,423
85,020
473,931
152,561
43,911
80,489

13.1
13.0
31.3
12.7
17.0
11.2
13.7

Residual
Resi-dual
Monthly
Gr. (%)
Run rate
16.7 121,336
16.7 112,404

16.8

8,932

FY15 YTD
Monthly
Run rate
104,489
94,428

10,061

Source: Company, MOSL

Jinesh Gandhi (Jinesh@MotilalOswal.com); +91 22 3982 5416

2 December 2014

Investors are advised to refer through disclosures made at the end of the Research Report.

Automobiles | Update

CMP: INR536

TP: INR618

Buy

Above estimate, with 2% YoY growth

Bloomberg

TTMT IN

Equity Shares (m)

M&HCV recovery continues, while cars also witnesses growth

3218.9

M.Cap. (INR b) / (USD b)

545/331

52-Week Range (INR)

1686/27.6

1, 6, 12 Rel. Per (%)

9/133/380

Financial & Valuation (INR b)

Y/E March
2015E 2016E 2017E
Net Sales

2,630 3,245 3,775

EBITDA

463

588

692

NP

196

271

327

Adj. EPS (INR)

60.8

84.1 101.6

EPS Gr. (%)

32.9

38.4

20.7

BV/Sh. (INR)

264

347

447

RoE (%)

26.0

27.5

25.6

RoCE (%)

26.0

28.7

28.3

4.0

2.9

3.6

Payout (%)

Valuations
P/E (x)

8.6

6.2

5.2

P/BV (x)

2.0

1.5

1.2

EV/EBITDA (x)

3.9

2.8

2.1

Div. Yield (%)

0.4

0.4

0.6

Tata Motors Nov-14 sales volumes grew 2% YoY to 41,720 units (v/s est 35,993 units).
We estimate overall volume de-growth of ~12% in FY15, implying residual growth of
5% or run-rate of ~44k.
HCV sales grew 40% YoY 10,752 units (est 9,234 units). Our industry interaction
indicates that freight rates have started inching upwards driven by gradual increase in
fleet operators utilization. Over the next few months, we expect recovery in MHCV
volumes to gather pace on expectation of pick-up in economic activity and pent up
demand due to sharply lower volumes of last two years. We estimate ~12% HCV
growth in FY15, implying 20% residual growth or run-rate of ~12,808 units.
LCV sales continue to decline, with 17% YoY to 18,654 (est 15.7k units). Our industry
interaction indicates that credit availability has been difficult due to rise in defaults.
We estimate decline of 24.4% in LCVs in FY15, implying 6% residual de-growth or runrate of ~19k.
Car sales witnessed growth for first time in many month, with growth of 27.5% YoY to
10,486 units (est 9,044 units). Recently launched Zest (compact sedan) has received
encouraging response after launch but the pace seems to slow down. We estimate
decline of 7% in passenger cars in FY15, implying 7.5% residual growth or ~9,490 units.
UV sales were at 1,828 units (est 2,020 units), a de-growth of 28% YoY. We estimate
4.9% UV de-growth in FY15, implying 18% residual growth or run-rate of 3,107 units.
The stock trades at 6.2x/5.2x FY16E/17E consol. EPS respectively. Maintain Buy.

Snapshot of volumes for November 2014

Total volume
HCV's
LCV's
Cars
UV's
of which exports

Nov-14

Nov-13

41,720
10,752
18,654
10,486
1,828
4,293

40,863
7,695
22,421
8,222
2,525
3,671

YoY
(%)
chg
2.1
39.7
-16.8
27.5
-27.6
16.9

Oct-14
46,119
11,860
21,932
10,053
2,274
21,566

MoM
FY15-YTD
(%) chg
-9.5
-9.3
-14.9
4.3
-19.6
-99.9

46,119
11,860
21,932
10,053
2,274
5,246

(%)
chg

FY15
estimate

Chg
(%)

-9.5
-9.3
-14.9
4.3
-19.6
-18.2

321,061
86,041
149,849
67,038
18,133
20,604

-19.2
7.5
-31.1
-14.0
-16.0
-38.3

Residual
Resi-dual
Monthly
Gr. (%)
Run rate
4.8
44,215
19.9
12,808
-6.1
18,809
7.5
9,490
17.8
3,107

FY15 YTD
Monthly
Run rate
40,133
10,755
18,731
8,380
2,267

Source: Company, MOSL

2 December 2014

Automobiles | Update

CMP: INR3,258

TP: INR3,518

Buy

Nov-14 in-line, with volumes growth of 3% YoY

Bloomberg

HMCL IN

Equity Shares (m)

Launches operations in Columbia

199.7

M.Cap. (INR b) / (USD b)

650.7/10.5

52-Week Range (INR)

3080/1907

1, 6, 12 Rel. Per (%)

9/133/380

Financial & Valuation (INR b)

Y/E March

2015E 2016E 2017E

Sales

287.8 328.9 378.4

EBITDA

38.7

47.2

55.3

NP

28.9

37.1

43.9

Adj. EPS (INR)

145

186

220

EPS Gr. (%)

54.3

28.4

18.5

BV/Sh. (INR)

342

431

542

RoE (%)

46.5

48.0

45.2

RoCE (%)

64.2

67.8

63.3

Payout (%)

55.7

49.6

47.1

22.5

17.6

14.8

HMCLs Nov-14 volumes grew by 3% YoY (-9% MoM), to 547,413 units (v/s est 551,751
units).
We estimate volume growth of 12% for FY15, implying residual growth of 16.5% or
~616k units.
HMSI domestic volumes grew 15.5% YoY at ~354k, with ~33% growth in scooters (to
~217k) and ~4% decline in motorcycles (to ~137k).
It rolled out the new sportier version of its 150-cc motorcycle 'Xtreme' in November
2014.
During the month, it also launched its operations in Colombia. It introduced six of its
best-selling motorcycles through a network of 120 outlets.
The stock trades at 17.6/14.8x FY16/17 EPS of ~INR186/220. Maintain Buy.

Valuations
P/E (x)

9.5

7.6

6.0

EV/EBITDA (x)

P/BV (x)

15.5

12.3

10.1

Div. Yield (%)

2.1

2.5

2.8

Snapshot of volumes for November 2014

Total volume

Nov-14

Nov-13

YoY
(%)
chg

Oct-14

547,413

530,530

3.2

604,052

MoM
FY15-YTD
(%) chg
-9.4

604,052

(%)
chg

FY15
estimate

Chg
(%)

-9.4

4,530,121

9.6

Residual FY15 YTD

Resi-dual
Monthly Monthly
Gr. (%)
Run rate Run rate
16.5

615,890

566,265

Source: Company, MOSL

2 December 2014

Automobiles | Update

CMP: INR1,296

TP: INR1,379

Neutral

Nov-14 below estimate, with 21% YoY de-growth

Bloomberg

MM IN

Equity Shares (m)

MCap. (INRb)/(USD
b)
52-Week Range

741.7/12.0

(INR)
1, 6, 12 Rel. Per (%)

-2/-12/-44

Tractors ~34% YoY, UV declines ~12.5% YoY

590.3

1421/847

Financial & Valuation (INR b)

Y/E March

2015E 2016E 2017E

Sales

425.5

508.1

602.8

EBITDA

48.3

57.1

68.1

NP (incl. MVML)

35.0

40.6

48.3

Adj. EPS (INR) *

58.4

67.8

80.7

(10.5)

16.1

19.0

Cons. EPS (INR)

71.6

93.6

115.0

BV/Share (INR)

328

381

445

RoE (%)

17.9

17.7

17.9

RoCE (%)

18.6

19.0

19.8

Payout (%)

29.7

25.8

21.8

P/E (x)

22.2

19.1

16.1

Cons. P/E (x)

18.1

13.8

11.3

4.0

3.4

2.9

EV/EBITDA (x)

15.7

13.1

10.7

Div. Yield (%)

1.2

1.2

1.2

EPS Gr. (%)

Valuations

P/BV (x)

* incl. MVML

Nov-14 volumes de-grew by 21% YoY to ~49,625 units (v/s est 62,314 units), impacted
by ~34% YoY de-growth in tractors and ~12.5% decline in UVs (incl pick-ups). We
estimate flat growth in FY15, implying ~15% residual growth or ~71,567 units.
Tractor volumes declined by 34% YoY to 15,333 units (v/s est 23,350 units), with
FY15YTD de-growth of 6%. We are assuming flat volumes for FY15, implying a residual
growth of 19% or 21,506 units.
UV (incl pick-ups) de-grew by 12.5% YoY to 28,585 units (v/s est 31,856 units), with
passenger UVs declining by ~17% and pick-ups by 3%. We estimate just 1% growth in
FY15 for UVs, implying residual growth rate of 15% or 43,226 units for the year.
Speaking on the monthly performance, Pravin Shah, Chief Executive, Automotive
Division & International Operations (AFS), Mahindra & Mahindra Ltd. said, "The auto
industry continues to face its sluggish demand on the back of factors such as low
consumer sentiments and high interest rates. The reducing international crude prices
and the subsequent lowering of fuel prices should help in revival of demand in the
coming months.
Commenting on the monthly performance, Rajesh Jejurikar, Chief Executive, FES &
2Ws, M&M said, "The tractor industry has been difficult due to delayed rains and
sowing. A delayed paddy crop, low yield and low prices for sugarcane, cotton and
paddy have led to a low demand and low cash in hand. There is also a base effect to
some extent as Diwali this year was in October 2014 vis--vis in November last year.
We see significant downside risk to our EPS estimates, impacted by severe pressure on
both UVs and tractors. While tractor is undergoing cyclical pressure, UV business is
witnessing structural challenges. Based on our current estimates, the stock trades at
13.8x/11.3x FY16E/17E consolidated EPS. Maintain Neutral.

Snapshot of volumes for November 2014

Total volume
UV (incl. pick-ups)
LCV
Verito (Logan)
Three-Wheelers
Tractors

Nov-14

Nov-13

49,625
28,585
582
120
5,005
15,333

63,013
32,673
443
278
6,500
23,119

YoY
(%) Oct-14
chg
-21.2 73,650
-12.5 38,271
31.4
440
-56.8
104
-23.0 6,096
-33.7 28,739

MoM
FY15-YTD
(%) chg
-32.6
-25.3
32.3
15.4
-17.9
-46.6

73,650
38,271
440
104
6,096
28,739

(%)
chg

FY15
estimate

Chg
(%)

-32.6
-25.3
32.3
15.4
-17.9
-46.6

488,286
259,636
5,469
1,072
39,162
182,947

-7.3
-6.5
3.4
-84.2
-6.6
-6.3

Residual
Resi-dual
Monthly
Gr. (%)
Run rate
15.2
71,567
14.9
43,226
-6.2
673
-59.2
139
12.9
6,023
18.8
21,506

FY15 YTD
Monthly
Run rate
61,036
32,455
684
134
4,895
22,868

Source: Company, MOSL

2 December 2014

Automobiles | Update

CMP: INR54

TP: INR63

Buy

Nov-14 above estimate, with 45.5% YoY growth

Bloomberg

AL IN

Equity Shares (m)

M&HCV recovery sharper than expected with ~92% YoY growth

2845.9

M.Cap. (INR b) / (USD b)

153/2.5

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

56/15
14/44/139

Financial & Valuations (INR b)

Y/E March
2015E 2016E 2017E
Sales

125.5 168.6 214.9

EBITDA

9.4

17.3

NP

1.2

7.8

14.0

Adj. EPS (INR)

0.4

2.7

4.9

EPS Gr. (%)

NA

NA

NA

BV/Sh. (INR)

18.8

20.9

25.2

2.4

13.7

21.4

RoE (%)

24.7

RoCE (%)

6.1

13.3

20.1

Payout (%)

18.3

10.1

129.8

20.0

11.0

2.9

2.6

2.2

EV/EBITDA (x)

20.7

10.9

7.2

Div. Yield (%)

0.9

0.9

Ashok Leyland reported sales volume growth of 45.5% YoY (-16% MoM) in Nov-14
sales volumes to 7,732 units (est 6,407 units). We estimate 11% growth in FY15,
implying 17% residual growth or ~9,465 units.
MHCV volumes grew 92% YoY to 5,204 units (v/s est 3,937 units). Management has
indicated improved demand outlook for 2H led by acceleration in economic activity.
We estimate 19% growth in FY15, implying residual growth of 20% or ~7,035 units.
Decline in LCVs (Dost & Stile) continues, although pace has moderated to ~3% decline
in Nov-14 to ~2,528 units (v/s est 2,470 units).
The stock trades at 20x/11x FY16E/FY17 EPS. Maintain Buy.

Valuations
P/E (x)
P/BV (x)

Snapshot of volumes for November 2014

Total volume
CV (ex LCV)
LCV (Nissan JV)

Nov-14

Nov-13

YoY
(%)
chg

Oct-14

7,732
5,204
2,528

5,315
2,715
2,600

45.5
91.7
-2.8

9,193
6,621
2,572

MoM
FY15-YTD
(%) chg
-15.9
-21.4
-1.7

9,193
6,621
2,572

(%)
chg

FY15
estimate

Chg
(%)

-15.9
-21.4
-1.7

61,459
44,178
17,281

7.9
17.4
-10.6

Residual FY15 YTD

Resi-dual
Monthly Monthly
Gr. (%)
Run rate Run rate
16.9
20.3
7.9

9,465
7,035
2,430

7,682
5,522
2,160

Source: Company, MOSL

2 December 2014

Automobiles | Update

CMP: INR14,513

TP: INR17,265

Buy

Nov-14: Royal Enfield below estimate, with 52% growth

Bloomberg

VECV in-line with 36% growth, led by 29% growth in domestic volumes

EIM IN

Equity Shares (m)

27.0

M.Cap. (INRb) /(USDb)

355.9/5.8

52-Week Range (INR)

15145/4405

1, 6, 12 Rel. Per (%)

12/84/129

Financial summary (INR b)

Y/E December 2014E

2015E

2016E

Net Income

87.4

125.9

172.4

EBITDA

11.1

19.1

Net Profit

6.4

30.2
17.3

10.9

Adj. EPS (INR)

236

405

EPS Gr. (%)

61.5

71.8

BV/Sh. (INR)

900

1,248

1,826

RoE (%)

28.4

37.7

41.6

RoCE (%)

28.5

40.8

48.4

0.3

0.3

0.3

P/E (x)

59.4

34.6

21.9

P/BV (x)

15.6

11.2

7.7

EV/EBITDA (x)

37.8

22.1

13.6

Div. Yield (%)

0.2

0.3

0.3

Payout (%)

639
57.9

Royal Enfield volumes grew 52% YoY to 27,524 units (est 28,739 units). We estimate
~47% growth in CY15 to 449,075 units.
VECVs overall volumes grew 36% YoY to 3,052 units (in-line). We estimate ~39%
growth in CY15, led by roll-out of new generation CVs.
Domestic sales are in-line with 29% growth, so are export volumes with 77% growth.
Dom. LMD segment was below estimate with 7% growth to 1,446 units (v/s est 1,550
units).
Dom. Buses volumes were below estimate with just 3% growth to 308 units (v/s est
329 units).
Dom. HD segment grew by 72% to 479 units (v/s est 377 units).
The stock trades at 34.6x/21.9x CY15E/CY16E EPS of INR405/639 respectively.
Maintain Buy.

Valuations

Snapshot of volumes for November 2014

Royal Enfield
VECV
Domestic HD
Domestic Buses
Total Domestic

Exports

Nov-14

Nov-13

YoY
(%)

Oct-14

27,542
3,052
479
308
2,494
558

18,131
2,244
279
299
1,928
316

51.9
36.0
71.7
3.0
29.4
76.6

28,020
3,326
576
540
2,851
475

MoM
MoM
CY14-YTD
(%) chg
(%)
-1.7
-8.2
-16.8
-43.0
-12.5
17.5

28,020
3,326
576
540
2,851
475

-1.7
-8.2
-16.8
-43.0
-12.5
17.5

CY14
estimate

Chg
(%)

273,967
35,741
4,988
7,711
30,300
5,441

72.5
-5.3
-7.2
-3.4
-13.1
89.9

Residual CY14 YTD

Resi-dual
Monthly Monthly
Gr. (%)
Run rate Run rate
62.5
31,386
24,906
40.0
4,302
3,249
2.8
767
453
35.9
622
701
29.2
3,640
2,755
156.8
663
495

Source: Company, MOSL

2 December 2014

Automobiles | Update

CMP: INR236

TP: INR307

Buy

Nov-14 below estimate, with 36% YoY growth

Bloomberg

TVSL IN

Equity Shares (m)

M.Cap. (INR b) / (USD b)

114.9/1.9
267/52

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

TVS Motors Nov-14 sales were below estimates at 220,046 units (v/s est 234,000
units), a growth of ~36% YoY (-12% MoM). We estimate overall volume growth of
~33% in FY15, implying residual growth of 43% or run-rate of ~257k.
Scooters volumes grew 62% YoY to 62,223 units (est 70,000 units) driven by strong
performance of Jupiter together with benefit of recently launched Scooty Zest (110cc
variant).
Motorcycle volumes grew by 40% YoY to 86,424 units (est 85,000 units). Recently
launched Star City Plus has received encouraging response.
Mopeds have registered growth of 12% YoY with 62,332 units (est 70,000 units).
3Ws have grown by 44% YoY to 9,067 units (est 9k units) driven by exports.
Exports continue to grow strongly with 55% YoY growth to 39,215 units (est 30,000
units).
The stock trades at 15.7x/12.6x FY16E/FY17E EPS of ~INR15.4/INR19.2. Maintain Buy.

-11/63/249

Financial & Valuation (INR b)

Y/E March
2015E 2016E 2017E
Sales

Both scooters and mopeds are below estimates, although growth was good

475.1

109.5

139.0

160.4

EBITDA

6.9

11.4

14.0

Adj. PAT

4.0

7.3

9.1

EPS (INR)

8.5

15.4

19.2

EPS Gr. (%)

55.0

80.9

BV/Sh (INR)

36.2

48.9

RoE (%)

25.8

36.2

RoCE (%)

29.0

42.0

33.6
41.1

Payout (%)

24.8

17.1

15.2

28.4

15.7

12.6

6.7

4.9

3.7

EV/EBITDA (x)

16.9

10.1

7.8

Div. Yield (%)

0.7

0.9

1.0

24.8
65.2

Valuations
P/E (x)
P/BV (x)

Snapshot of volumes for November 2014

Nov-13

YoY
(%)
chg

Oct-14

220,046 161,908
86,424 61,471
62,223 38,331
62,332 55,802
9,067
6,304

35.9
40.6
62.3
11.7
43.8

250,835
98,052
70,508
73,108
9,167

Nov-14
Total volume
Motorcycles
Scooters
Mopeds
Three-Wheelers

MoM
FY15-YTD
(%) chg
-12.3
-11.9
-11.8
-14.7
-1.1

1,745,652
669,237
487,678
517,683
71,054

FY14-YTD

(%) chg

FY15
estimate

1,360,924
539,535
299,157
468,839
53,393

28.3
24.0
63.0
10.4
33.1

2,773,914
1,052,822
798,000
812,700
110,392

Resi- Residual FY15 YTD

Growt
dual Gr. Monthly Monthly
h (%)
(%)
Run rate Run rate
33.3
32.7
67.8
11.3
35.2

42.8
51.1
75.8
12.9
39.3

257,066
95,896
77,581
73,754
9,835

218,207
83,655
60,960
64,710
8,882

Source: Company, MOSL

2 December 2014

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