MotoGaze August 2016

August 25, 2016

Sector View

Good monsoons propel volumes in July!!!

Overweight

Volume performance for July 2016

Company
Hero Motocorp
Bajaj Auto
TVS Motors
Maruti Suzuki
Tata Motors
Mahindra and Mahindra
Ashok Leyland

Gr.

YoY(%)
9.1
-0.1
15.4
12.7
7.5
13.9
-4.8

Key players & industry volume growth July16 (%)

2.9 8.9

Industry
HMCL

-3.2

YoY gr

9.1

BAL -0.1

4.1
0.0

TVS
HMSI

15.4
6.2

16.5

Maruti

38.7

12.7

TML
-2.5

7.5

M&M

1.1

Hyundai

0.2

-5.5 ALL

MoM gr

13.9
10.7

-4.8

Source: Siam

Key players & industry volume growth YTDFY17 (%)

9.6

Industry
HMCL
BAL-1.4

15.3

HMSI
Maruti

20.9
4.9

TML

7.0
11.6

M&M
Hyundai

6.1

ALL

6.3

Performance in Q1FY17 fares largely well!

For Q1FY17, overall volumes for the auto sector grew 9.8% YoY; with 2W, CV & PV registering growth of 11%, 12% & 7.6% YoY, respectively.
Overall revenue & PAT of I-direct auto universe [ex-Tata Motors (TML) &
Balkrishna Industries (BIL), which are yet to publish results] grew 9.8%
YoY & 17.3% YoY, respectively. The impact of a reversal in input prices (as
anticipated) impacted operating margins (down ~24bps YoY) but higher
other income supported profitability. Our OEM universe (ex-TML) reported
revenue & PAT growth of 10.7% YoY (volume driven) & 18.9% YoY,
respectively, while the ancillary universe (ex-BIL) reported revenue & PAT
growth of 8.2% YoY & 13.3% YoY, respectively.

Industry growth = Launches + good sentiment + Pay Commission + GST

YTD gr

6.8

TVS

The overall auto industry reported strong volumes for July 2016, up 8.9%
YoY largely driven by improved rural sentiments. For July 2016, volume
for the 2-W space witnessed strong growth of 9.2% YoY, largely driven by
scooter volumes (up 15.2% YoY). The top two players HMCL & HMSI
posted healthy volume growth of 9.1% & 16.5% YoY, respectively, driving
overall 2-W growth. Passenger vehicle (PV) volumes grew 13.9% YoY,
driven by UV volumes, up 47.5% YoY. For MSIL, market leader in the PV
space, volumes came in strong at 12.7% YoY. High base & lower fleet
activity during monsoons resulted in marginal growth of 2.1% YoY for CV.
The M&HCV segment volumes witnessed a decline (4.6% YoY) for July
2016, after growing continually over the past two years YoY. The 3-W
segment continued to face headwinds in the export market, resulting in
overall volumes declining 8.9% YoY in July 2016. On the back of good
monsoons, domestic tractor volumes grew 8% YoY for July 2016. We
believe the overall auto sector will remain in a sweet spot, as multiple
factors viz. normal monsoons in 2016, the governments focus on vehicle
scrappage policy, implementation of Seventh Pay Commission and GST
will spur automotive demand over the next two years.

Source: Siam

Research Analyst
Nishit Zota
nishit.zota@icicisecurities.com
Vidrum Mehta
vidrum.mehta@icicisecurities.com

ICICI Securities Ltd. | Retail Equity Research

With expectations of an improvement in demand sentiments, we expect

the overall industry to grow 7-9% YoY in FY17E. We believe the PV space
will grow 8-10% YoY. Despite slower volume growth during April-July
2016, we expect M&HCV volumes to pick up (expect ~15% YoY growth
for FY17E) while LCV will continue with its recovery. The 2-W segment is
likely to grow 7-9% YoY, mainly led by growth in the scooter segment.
Tractor industry volumes are expected to grow ~15% in FY17E, assuming
good monsoons and a gradual recovery due to a low base. On a longer
term basis, we remain positive on the growth prospects of the industry
with a rise in incomes augmenting auto penetration levels in the country
coupled with lower interest rate. We believe the auto industry will witness
a demand recovery mainly on the back of new launches and refreshes
across segments. The sector is expected to see the positive impact of the
Pay Commission that will incrementally boost PV volumes by ~16% in the
next two years. We further believe the sector will also be a key beneficiary
of implementation of Goods & Service Tax (GST), going forward.
For July 2016, the BSE Auto Index was up 8.3% outperforming the
benchmark index which was up 4.9%. Among our I-direct auto coverage,
we remain bullish on frontline OEM stocks like Eicher Motors, Tata Motors
and M&M. However, with the favourable impact of operating leverage due
to increased demand, the earnings growth trajectory for ancillary stocks is
likely to remain on the uptrend.

Two wheeler & tractor do well; weaker exports impacts three wheeler
For July 2016, 2-W volumes registered strong growth of 9.2% YoY
primarily supported by good monsoons in 2016. In terms of category wise
growth, the scooter segment continued to outpace motorcycle growth, up
15.2% YoY to 528,372 units. Major players in the scooter space (viz. HMSI
& HMCL) posted good growth of 20.4% YoY & 37.9% YoY, respectively,
for July 2016. Overall motorcycle volumes grew 5.4% YoY after volumes
of market leader HMCL grew 5.5% YoY to 456,987 units. The moped
segment (driven by TVS Motors) reported strong growth of 26.1% YoY to
76,947 units.
The 3-W volumes declined 8.9% YoY to 76,012 units, as domestic growth
of 2.1% YoY to 46,098 units was offset by volume de-growth of 21.9%YoY
to 29,914 units. The 3-W export market continues to remain challenging
for players.
Tractor industry domestic volumes grew 8.3% in July 2016, on the back of
good monsoons and a gradual recovery in tractor demand.

Market share movement

According to data released by the Society of Indian Automobile
Manufacturers (Siam), the domestic market share of two and threewheeler players as of July 2016 is mentioned below.
The 2-W segment reported good growth in July 2016, post

Exhibit 1: Domestic market share movement in two-wheelers

45

signs of a demand revival in rural areas. HMSI reported

39.2

40

strong volume growth thereby gaining market share of

~144 bps YoY to 27.7% in July 2016

Jul-15

Jun-16

Jul-16

37.6 37.0

35
30
26.3

27.2 27.7

(%)

25
20
15

13.1 13.5 13.6

11.9 12.1 12.0

9.6

10

9.6

9.7

5
0
Bajaj Auto

Hero MotoCorp

TVS Motors

HMSI

Others

Source: Siam, Data used is YTD

Exhibit 2: Domestic market share movement in three-wheelers

In July 2016, domestic 3W volumes grew 2.1% YoY.
Others

Market leader BAL posted growth of 8.4% YoY in the

Jul-15

9.4
9.0

Jun-16

Jul-16

12.1

domestic market, thereby gaining substantial market share

(up ~741 bps YoY to 53.3%). Except M&M & BAL,

9.0
8.6
10.5

M&M

domestic volumes of all others companies declined on a

YoY basis for July 2016

28.3
28.5

Piaggio

31.5
53.3
53.9

Bajaj Auto
45.9
0

10

20

30

40

50

60

(%)

Source: Siam, Data used is YTD

ICICI Securities Ltd. | Retail Equity Research

Page 2

The domestic motorcycle segment witnessed signs of a

Exhibit 3: Domestic market share movement in motorcycles

demand recovery, with volumes up 5.4% YoY in July 2016.

60

53.2

Hero MotoCorp maintained its leadership position largely

maintaining its share on a MoM basis. BAL & TVS market

Jul-15

Jun-16

Jul-16

50.6 50.5

50

share improved strongly on a YoY basis, on the back of

strong volume growth during July 2016

(%)

40
30
20

17.9 18.6 18.8

14.0 14.9 14.6

6.4 7.1 7.2

10
0
Bajaj Auto

Hero Motocorp

TVS motor

Honda

Source: Company, ICICIdirect.com Research

The domestic scooter segment continued to outperform the

Exhibit 4: Domestic market share movement in scooters/scooters

motorcycle segment witnessing growth of 15.2% YoY for July

Jul-15

70

2016. Market leader HMSIs leadership position was further

extended by ~90 bps MoM to 59%

Jun-16

Jul-16

59.0 58.1 59.0

60
50

(%)

40
30
20

12.8

15.4 15.1

14.7 13.4 13.2

13.4 13.2 12.7

10
0
Hero Motocorp

TVS Motors

Honda

Others

Source: Siam, Data used is YTD

ICICI Securities Ltd. | Retail Equity Research

Page 3

Exhibit 5: Market share movement in executive motorcycle (<125 cc) segment*

70

segment (<=125 cc) in India with a market share of ~58%.

20
58.4

60

The launch of Victor GLX helped TVS gain some market

share, which is at 7.5%

16

14.2

50

12

(%)

40
7.5

30

(%)

HMCL continues to dominate the executive motorcycle

20
4

19.9

10
0

Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16

Bajaj Auto (RHS)

Hero Motocorp (LHS)

TVS (RHS)

HMSI (RHS)

Source: Siam * only top 4 two-wheeler OEMs

Exhibit 6: Market share movement in motorcycle greater than 125 cc segment

30

90

segment (<=125 cc) in India with market share ~ 75%. For

74.6

80

TVS Motors, the strong brand Apache is driving its overall

volumes & market share

20.9

70

20

60
(%)

25

50

15

40
12.1

30
20

10
5

10

4.5

Bajaj Auto (LHS)

TVS (RHS)

Jul-16

Jun-16

Apr-16

May-16

Feb-16

Mar-16

Jan-16

Dec-15

Oct-15

Nov-15

Sep-15

Jul-15

Hero Motocorp (RHS)

Aug-15

Jun-15

Apr-15

May-15

Feb-15

Mar-15

Jan-15

Dec-14

Oct-14

Nov-14

Sep-14

Jul-14

Aug-14

HMSI (RHS)

Source: Siam *only top three vehicle two-wheeler OEMs

ICICI Securities Ltd. | Retail Equity Research

Page 4

(%)

BAL continues to dominate the executive motorcycle

Hero MotoCorp (HERHON)

Hero MotoCorp: Sales volumes

108

500

65

93 94 93 93
72
86
70

54 53

75
63

433
427
542
531
478
406
470
458
513
527
514
486
457

('000s)

200

Hero MotoCorps volumes grew 9.1% YoY at 532,113 units. Good

monsoon driven rural sentiments will drive HMCL volumes; as
~50% of HMCL volume is rural centric in nature

The motorcycle segment grew 5.5% YoY to 4.6 lakh units. HMCLs
scooter volume was up 37.9% YoY to 75,126 units mainly due to
the new Duet, which clocked volumes of 24,521 units. Volumes of
Maestro grew 24.2% YoY to 34,027 units but the same was partly
offset by a decline in volumes of Pleasure (down 38.8% YoY to
16,578 units)

Export volumes declined 48.6% YoY to 11,554 units, largely due to

a decline in exports of Pleasure (from 9,346 units to 840 units). The
management continues to focus on exports market. It is likely to
expand its global footprint by entering ~50 markets with the target
sales of 12 million units (~10% of total volume) by FY20E

100

400
300

120

80
60

('000s)

600

40
20

100

0
Jul-16

May-16

Mar-16

Jan-16

Nov'15

Sep'15

Jul'15

Motorcycles

Scooters

Source: Siam, ICICIdirect.com Research

Exhibit 7: Volume performance (in units)

Segment
Motorcycles
Scooters
Total Sales
Export(inc. above)
Exports (% of sales)

Jul-16
456,987
75,126
532,113
11,554
2.2

Jul-15
%chg
433,083
5.5
54,497 37.9
487,580
9.1
22,479 -48.6
4.6 -244 bps

Jun-16
486,225
63,308
549,533
11,469
2.1

%chg
-6.0
18.7
-3.2
0.7
8 bps

YTD'17
1,983,552
293,950
2,277,502
50,499
2.2

YTD'16
1,909,820
223,303
2,133,123
67,780
3.2

%chg
3.9
31.6
6.8
-25.5
-96 bps

Source: Company, Siam

Bajaj Auto (BAAUTO)

Bajaj Autos (BAL) 2-W volumes grew 1.1% YoY, as growth of

21.3% YoY in domestic volumes was largely offset by 19.9% YoY
de-growth in export. BAL has seen a gradual improvement in
motorcycle market share up from 16.5% in March 2015 to 18.8%
in June 2016. Volumes of Platina were up 45.9% YoY to 40,233
units. The newly launched Avenger & V 15 boosted its volumes,
which were at 24,156 units & 22,846 units, respectively

Its 3-W volumes declined 7.3% YoY, after growth of 8.4% YoY in
domestic volumes was offset by de-growth of 20.5% YoY in
export volumes. The management expects export volumes to
recover in H2FY17 thereby driving its overall volumes

The management is planning to launch Pulsar 400 (in the sport

segment in Q2FY17,) another model from V-platform and a new
model in the entry segment in Q3FY17, which will drive its
volumes. The company is already growing at double digit growth
and expects strong growth in H2FY17

Bajaj Auto: Sales volumes

450

45

307

(%)
40
39 40
286

36

292

264

235

253

248

309

271

330

290

282

36

100

273

41

200

35

33

50

31

Two-Wheelers

Three-Wheelers

Source: Siam, ICICIdirect.com Research

30
Jul-16

Mar-16

Jan-16

Nov'15

Sep'15

Jul'15

May-16

150

44

44

38
41

45

37

41

41

44

250

40

50

44

45

39

300

50

54

50
48

350

52

400

('000s)

55

53

% exports

Exhibit 8: Volume performance (in units)

Segment
Total 2-wheeler sales
2W exports
2W domestic sales
Total 3-wheeler sales
3W exports
3w domestic sales
Total Sales
Total Domestic Sales
Total Exports
Exports as % of sales
Source: Company, Siam

ICICI Securities Ltd. | Retail Equity Research

Jul-16
285,527
111,203
174,324
44,306
20,608
23,698
329,833
198,022
131,811
40.0

Jul-15
%chg
282,433
1.1
138,762
-19.9
143,671
21.3
47,798
-7.3
25,928
-20.5
21,870
8.4
330,231
-0.1
165,541
19.6
164,690
-20.0
49.9 -991 bps

Jun-16
273,298
104,673
168,625
43,671
18,579
25,092
316,969
193,717
123,252
38.9

%chg
4.5
6.2
3.4
1.5
10.9
-5.6
4.1
2.2
6.9
108 bps

YTD'17
1,158,067
434,863
723,204
165,767
66,865
98,902
1,323,834
822,106
501,728
37.9

YTD'16
%chg
1,157,668
0.0
527,775
-17.6
629,893
14.8
185,592
-10.7
113,411
-41.0
72,181
37.0
1,343,260
-1.4
702,074
17.1
641,186
-21.8
47.7 -983 bps

Page 5

TVS Motors (TVSSUZ)

TVS Motors: Sales volumes

TVS volumes (2-W+3-W) for July 2016, at ~2.5 lakh units, were
up 13.6% YoY. The 2-W volumes grew 15.4% YoY while 3-W
volumes declined 22.5% YoY for July 2016

Motorcycle segment volumes grew 22.8% YoY to 95,062 units,

driven by volumes of Apache up 43.4% YoY to 37,197 units. Also,
volumes of Victor GLX at 12,992 units supplemented growth.
However, the same was partly offset by volumes of Star City &
Phoenix, down 21.9% YoY & 84.2% YoY, respectively. Scooter
segment volume surprisingly declined 2.3% YoY to 68,033 units,
as growth of Jupiter & Wego up 6.3% YoY & 2.3% YoY,
respectively, was offset by de-growth in volumes of Zest & Pep+.
Moped volumes were up 26.1% YoY at 76,947 units

Overall export (16.7% of sales) volumes declined 5.8% YoY to

40,192 units due to both 3-W & 2-W exports, which were down
22.6% YoY & 2.7% YoY, respectively

300

77

77
68
95

76
65

68

96

95

72

63
90

67

69

68
87

67
77

58

55
63

65
71

Nov '15

83

60
76
106
82

91
75
90

73

70

Sep'15

50

87

100

55

57

61

150

77

(%)

200

77

250

Motorcycles

Scooters

Jul-16

May-16

Mar-16

Jan-16

Jul'15

Mopeds

Source: Siam, ICICIdirect.com Research

Exhibit 9: Volume performance (in units)

Segment
Motorcycles
Scooters
Mopeds
Total 2-W Sales
3-Wheelers
Total Sales
Exports(incl. in above)
Exports as % of sales
Domestice sales

Jul-16
95,062
68,033
76,947
240,042
7,960
248,002
40,192
16.7
207,810

Jul-15
77,397
69,626
61,021
208,044
10,277
218,321
42,677
20.5
175,644

%chg
22.8
-2.3
26.1
15.4
-22.5
13.6
-5.8
18.3

Jun-16
95,439
67,539
76,953
239,931
7,128
247,059
39,086
16.3
207,973

%chg
-0.4
0.7
0.0
0.0
11.7
0.4
2.8
-0.1

YTD'17
377,477
264,347
298,819
940,643
25,297
965,940
143,177
15.2
822,763

YTD'16
332,369
234,668
248,893
815,930
40,506
856,436
161,723
19.8
694,713

%chg
13.6
12.6
20.1
15.3
-37.5
12.8
-11.5
18.4

Source: Company, Siam

Honda Motorcycles & Scooters India (HMSI)

HMSI: Motorcycles & scooter sales volumes

For July 2016, HMSI reported healthy volumes growth of 16.5%

YoY to 453,844 units. This was mainly led by strong growth in the
scooter segment up 15.2% YoY to 309,170 units further expanding
its overall 2-W domestic market share by 144 bps YoY to 27.7%

Domestic motorcycle volumes declined 0.8% YoY. This was after

volumes of Livo (up 217.9% YoY) at 21,318 units & new CB Hornet
160R at 2660 units were offset by a decline in volumes of CB Shine
down 10.7% YoY. Domestic scooter volume grew 15.2% YoY, led
by 13.5% YoY & 41.9% YoY growth in Activa & Dio, respectively,
but partially offset by decline in volume of Aviator, down 16.3%
YoY. Its newly launched NAVI clocked volumes of 11,644 units

Export volumes grew 33.3% YoY to 24,333 units, primarily led by

growth in the scooter segment. With HMSIs focus more on
domestic markets, the export segment remains a small part of the
companys volume pie contributing 5.4% of total volumes

450
400

309

268

265

147

143

272
241
129

245

236

208

126

99

264
147

208

257

200

104

268

139

250

121

('000s)

300

270

350

120

159

50

121

100

162

150

Motorcycles

Jul-16

May-16

Mar-16

Jan-16

Nov'15

Sep'15

Jul'15

Scooters

Source: Siam, ICICIdirect.com Research

Exhibit 10: Volume performance (in units)

Segment
Motorcycles
Scooters
Total Sales
Exports(incl.above)
Exports as % of sales
Domestice sales

Jul-16
120,381
309,170
453,844
24,333
5.4
429,511

Jul-15
121,304
268,302
389,606
18,257
4.7
371,349

%chg
-0.8
15.2
16.5
33.3
68 bps
15.7

Jun-16
142,618
265,361
427,222
19,243
4.5
407,979

%chg
-15.6
16.5
6.2
26.5
86 bps
5.3

YTD'17
569,434
1,115,073
1,748,499
81,072
4.6
1,667,467

YTD'16
512,204
908,808
1,446,497
60,757
4.2
1,385,740

Source: Company, Siam

ICICI Securities Ltd. | Retail Equity Research

Page 6

%chg
11.2
22.7
20.9
33.4
44 bps
20.3

Four-wheeler industry
The overall passenger vehicles segment for July 2016 registered growth
of 13.9% YoY to 321,568 units. The domestic PV space was up 16.8% YoY
to 259,685 units while exports volumes grew 3.2% YoY to 61,883 units.
Within sub-segments of the PV space, utility vehicles (UVs) reported
strong volume growth of 47.5% YoY high supporting overall PV growth.
Volumes of the other two segments, cars & vans, came in at 5.2% YoY &
19.2% YoY, respectively. Market leader MSILs overall volumes grew
12.7% YoY to 137,116 units.
For July 2016, utility vehicle (UV) volumes were up 47.5% YoY at 78,421
units, driving the overall PV market. The UV1 sub-segment registered
growth of 64.2% YoY to 56,340 units, mainly driven by Hyundais Creta
(volumes at 13,429 units) & Maruti Suzukis Vitara Brezza (volumes at
10,252 units). M&Ms TUV3OO & KUV1OO volumes were at 2,199 units &
3,382 units, respectively, for July 2016. Volumes in UV2 space grew 22.5%
YoY to 20,342 units, supported by Toyota (Innova volume up 42.5% YoY
to 7,765 units) & Honda (new BR-V volumes came at 3,333 units).
The commercial vehicles segment witnessed growth of 2.1% YoY to
62,058 units. The monsoon season lowered the fleet operator activity
impacting the M&HCV volume, which for the first time after two years on
YoY basis declined 4.6% YoY to 24,655 units for July 2016. LCV volumes
are witnessing a recovery, up 7% YoY to 37,403 units supporting the
overall CV volumes for July 2016. Domestic volumes of Tata Motors &
Ashok Leyland declined on a YoY basis for July 2016.

Market share movement

According to Siam, the domestic market share for passenger vehicles (PV)
and commercial vehicles (CV) in July 2016 was as follows:
Exhibit 11: Domestic market share movement in passenger vehicles
MSIL continues to dominate the PV segment. The domestic

21.6
21.3
20.7

Others

market of MSIL expanded 60 bps YoY to 46.8%. On the

other hand, Hyundai maintained its market share at >17%,

Jun-16

Jul-16

0.9
1.0
1.4

GM

though it moderated on an MoM basis

Jul-15

8.0
8.5
7.8

M&M
5.5
5.3
5.7

Tata Motors

17.2
17.7
17.0

Hyundai

46.8
46.2
47.5

Maruti
0

10

15

20

(%)

25

30

35

40

45

Source: Siam, Data used is YTD * passenger vehicles as per Siam include Vans like Gio, Maxximo, Eeco, Ace

ICICI Securities Ltd. | Retail Equity Research

Page 7

50

Exhibit 12: Market share movement in A2 segment

The A2 segment is the bread & butter category of the

80

passenger car segment. The segment growth has

70

moderated over the last couple of months owing to a lack

60

of options among diesel variants

68.0

64.3

50
(%)

40

27.8

27.4

30
20
10

Jul-16

Jun-16

Apr-16

May-16

Feb-16

Mar-16

Jan-16

Dec-15

Oct-15

Nov-15

Sep-15

Jul-15

Hyundai

Aug-15

Jun-15

May-15

Apr-15

Feb-15

Mar-15

Jan-15

Dec-14

Oct-14

Nov-14

Sep-14

Jul-14

Aug-14

Maruti

Source: Siam, Top two PV OEMs considered

The M&HCV growth declined in July 2016, down 4.6% YoY.

Exhibit 13: Domestic market share movement in commercial vehicles

On the other hand, LCV continued with its demand

recovery, with volumes up 7% YoY. Thus, overall growth for

Jul-15

50

the CV segment moderated at 2.1% YoY in July 2016

Jun-16

Jul-16

44.3 43.9 43.5

45
40
35

(%)

30

23.9 23.7 24.1

25
17.5 17.3 17.5

20

14.3 15.1 14.9

15
10
5
0
ALL

M&M

Tata Motors

Others

Source: Siam Data used is YTD

The de-growth in the M&HCV segment as against volume

Exhibit 14: Segmental share in CVs

recovery in the LCV space has led the MHCV/LCV ratio to

70 62.7

come in at 40:60 in July 2016 against 43:57 in July 2015.

60

For September 2015, the ratio was at 48:52, more tilted

60.3

50

towards M&HCV, as the industry witnessed some prebuying due to implementation of ABS from October 1, 2015

(%)

40

39.7

37.3

30
20
10

M&HCV

LCV

Source: Siam

ICICI Securities Ltd. | Retail Equity Research

Page 8

Jul-16

Jun-16

May-16

Apr-16

Mar-16

Feb-16

Jan-16

Dec-15

Nov-15

Oct-15

Sep-15

Aug-15

Jul-15

Jun-15

May-15

Apr-15

Mar-15

Feb-15

Jan-15

Dec-14

Nov-14

Oct-14

Sep-14

Aug-14

Jul-14

Tata Motors: Domestic sales volume

Tata Motors (TELCO)

60

12.6

Tata Motors standalone volumes grew 7.5% YoY to 43,160 units.

The growth was largely seen in LCV & cars segment, which was
offset by de-growth in the M&HCV and UV space for July 2016

Domestic M&HCV volumes declined 9.4% YoY. However, LCV

volumes continued to witness a volume recovery, up 5.2% YoY.
The domestic car segment was up 43.3% YoY to 12,209 units,
mainly driven by its newly launched Tiago volumes at 5,114 units

JLRs wholesale volumes were up 34.9% YoY at 43,932 units.

Jaguar volumes were up 108.8% YoY to 14,369 units, driven by
XE volumes ~3,400 units & F-Pace volumes at ~5,400 units. Land
Rover volumes increased 15.1% YoY to 29,563 units, mainly
driven by Discovery & Discovery Sport. In terms of region, North
America & China market witnessed volume growth >50% YoY
while Europe & UK registered growth >20% YoY in July 2016

13.9
Jul-16

May-16

Mar-16

Jan-16

Jul'15

Sep'15

Nov'15

CV Sales

29.3

8.8
31.2

31.6

10.8
28.6

8.9
44.1

11.1

11.4
35.3

8.3
31.7

36.0

10.6
28.3

12.3

13.2
30.3

11.9

10

33.0

20

28.8

(000's)

30

10.7

40

29.5

50

PV Sales

Source: Company, ICICIdirect.com Research

Jaguar Land Rover sales volume

40
20

% Jaguar

% LR

Apr'16
May'16
June'16
July'16

Jul'15
Aug'15
Sept'15
Oct'15
Nov'15
Dec'15
Jan'16
Feb'16
Mar'16

55
50
45
40
35
30
25
20
15
10

(000's)

60

40.9
46.2
47.2
43.9

51.1
48.5
51.0
51.0
45.5
52.3

80

32.6
33.1

(% share of total volumes)

100

JLR total volumes(RHS)

Maruti Suzuki India: sales volumes

12

140
120

9.3

Jul-16

May-16

Mar-16

Jan-16

Nov'15

0
Sep'15

0
Jul'15

Source: Siam, ICICIdirect.com Research

%chg
-9.4
5.2
43.3
-28.4
5.8
7.5
108.8
15.1
34.9

Jun-16
10,147
16,017
11,705
804
5,603
44,276
12,942
34,255
47,197

%chg
5.4
-15.4
4.3
66.4
-4.1
-2.5
11.0
-13.7
-6.9

YTD'17
45,799
56,735
40,807
4,361
19,187
166,889
48,941
129,325
178,266

YTD'16
44,225
51,896
35,137
6,788
18,620
155,949
28,084
118,936
147,020

%chg
3.6
9.3
16.1
-35.8
3.0
7.0
74.3
8.7
21.3

Domestic volumes grew 13.9% YoY. Volumes of its newly

launches S-Cross, Baleno & Vitara Brezza were at 617, 12,722 &
10,252 units, respectively. However, stiff competition in the mini
car segment (Alto & WagonR) impacted its volumes, down 7.2%
YoY. DZire Tour (used for cabs & fleet operators) volumes were
down 9.2% YoY to 3,059 units

Export volumes remained flat, up 0.2% YoY (post decline in many

quarters) to 11,338 units, with its share at 8.3% of total sales

20

Total Sales

Jul-15
11,808
12,879
8,520
1,869
5,078
40,154
6,882
25,686
32,568

Maruti Suzukis volumes increased 12.7% YoY & recovered

sharply post the production disruption in June 2016. MSIL forayed
into LCV category with the launch of its Super Carry in July 2016

(%)

8.38
122
118
114
134
121
119
114
117
129
127
123
99
137

('000s)

40

Jul-16
10,698
13,544
12,209
1,338
5,371
43,160
14,369
29,563
43,932

10

100

60

Segment
Domestic MHCV
Domestic LCV
Domestic Pass.Car Sa
Domestic UV
Exports
Total Sales
Jaguar
Landrover
Total JLR Sales
Source: Company, Siam

Maruti Suzuki India (MARUTI)

Source: Company, ICICIdirect.com Research

80

Exhibit 15: Volume performance (in units)

Export %

Exhibit 16: Volume performance (in units)

Segment
Omni, Eeco,Versa
Alto, Wagon-R, Zen, Swift,Ritz,
Celerio, Dzire,Baleno
SX4, Swift Dzire Tour, Ciaz
Total Passengers
Gypsy, Vitara,Ertiga,Brezza
Total Domestic
LCV (Super Carry)
Exports
Total Sales
Exports as % of sales
Source: Company, Siam.

ICICI Securities Ltd. | Retail Equity Research

Jul-16
14,748

Jul-15
11,887

%chg
24.1

Jun-16
9,874

%chg
49.4

YTD'17
51,306

YTD'16
46,023

%chg
11.5

85,413.0
8,221
108,382.0
17,382
125,764.0
14
11,338.0
137,116
8.3

86,133.0
5,469
103,489.0
6,916
110,405.0
0
11,307.0
121,712
9.3

(0.8)
50.3
4.7
151.3
13.9
NA
0.3
12.7

67,683.0
4,868
82,425.0
9,708
92,133.0
0
6,707.0
98,840
6.8

26.2
68.9
31.5
79.0
36.5
NA
69.0
38.7

310,361.0
29,707
391,374.0
56,730
448,104.0
14
37,441.0
485,559
7.7

320,858.0
26,752
393,633.0
22,466
416,099.0
46,942.0
463,041
10.1

-3.3
11.0
-0.6
152.5
7.7
NA
-20.2
4.9

Page 9

Ashok Leyland (ASHLEY)

Ashok Leylands (ALL) volumes declined (4.8% YoY) for July 2016,
after growing continually over the past two years on a YoY basis.
Overall volumes for July 2016 declined 4.8% YoY to 10,492 units.
M&HCV volumes declined 7.1% YoY to 8,182 units while LCV
volumes were up 4.1% YoY to 2,310 units

The M&HCV goods segments volumes remained flat, down 0.1%

YoY to 6,094 units while M&HCV passenger volumes declined
22.8% YoY to 2,088 units

Exports rose 55.8% YoY to 1,223 units, with overall share at 11.7%
of sales. The management expects the volume share of exports &
defence segment to be ~15% each in the next four or five years

2.7

2.4
2.3

2.3

8.7
8.2
Jul-16

Jun-16

7.9
Apr-16

May-16

Mar-16

Feb-16

Dec'15

Jan-16

M&HCV

7.5

13.2

10.8

11.2

9.7

2.7
6.3
Nov'15

2.4

2.6

2.5

2.6
2.6
12.1
7.2
Oct'15

Sep'15

Aug'15

2.2

2.6
8.9

8.8
Jul'15

(000's)

18
16
14
12
10
8
6
4
2
0

3.5

Ashok Leyland: Total sales

LCV

Exhibit 17: Volume performance (in units)

Source: Siam, ICICIdirect.com Research

Segment
M&HCV Passenger
M&HCV Goods
LCV
Passenger Vehicles
Total Sales
Exports
Exports as % of sales
Source: Company, Siam

Jul-16
2,088
6,094
2,310
10,492
1,223
11.7

Jul-15
2,704
6,099
2,219
0
11,022
785
7.1

%chg
-22.8
-0.1
4.1
NA
-4.8
55.8

Jun-16
1,944
6,741

%chg
7.4
-9.6

2,423
0
11,108
653
5.9

-4.7
NA
-5.5
87.3

YTD'17
7,483
24,722
9,452
41,657
3,449
8.3

YTD'16 %chg
7,871
-4.9
22,413
10.3
8,892
6.3
28 -100.0
39,204
6.3
4,193
-17.7
10.7

Mahindra and Mahindra (MAHMAH)

Mahindra and Mahindra: Sales volume

35

39.0
39.5

40.7

41.9

44.0

41.6

35.6

40

34.7

(000's)

45

37.9

42.8

50

43.8

51.4

55

M&Ms overall automotive volumes were up 13.9% YoY to 39,458

units. Its core UV segment (including exports) grew 20.9% YoY
supported by its new launches (TUV300 & KUV100) but the same
was below industry UV volumes up 47.5% YoY

The newly launched TUV3OO & KUV1OO clocked volumes of

2,199 units and 3,382 units, respectively. However, the same was
offset by decline in volumes of its legacy models like Bolero &
XUV5OO. New launches and facelifts continue to hold the key for
M&M in the extremely competitive space

M&Ms tractor volumes grew 13.5% YoY to 17,553 units, mainly

on account of the low base & good monsoon. Domestic tractor
volumes were up 15.3% YoY to 16,452 units while export volumes
declined 7.2% YoY to 1,101 units. In FY16, tractor industry volume
de-grew 10.5% YoY. However, a low base & good monsoon has
revived tractor industry volumes (up 13.5% YoY on YTDFY17)

52.7

60

30
25
20
Jul-16

Jun-16

May-16

Apr-16

Mar-16

Feb-16

Jan-16

Dec'15

Nov'15

Oct'15

Sep'15

Jul'15

Aug'15

15

Source: SIAM, ICICIdirect.com Research

Exhibit 18: Volume performance (in units)

Mahindra and Mahindra: Tractor sales

17.6

23.0

14.7

13.6

15.1

12.9

18.1
11.7

15

15.5

(000's)

25

21.4

21.7

28.1

30

20

30.2

35

Segment
UVs
4-Wheeler pickups
M & HCV
Total 4wheeler Sales
3-Wheeler

Jul-16
15,962
13,168
1,394
30,524
4,781

Jul-15
13,204
12,148
1,252
26,604
4,483

%chg
20.9
8.4
11.3
14.7
6.6

Jun-16
15,777
13,540
1,293
30,610
4,381

%chg
1.2
-2.7
7.8
-0.3
9.1

YTD'17
71,871
50,394
5,057
129,480
16,786

YTD'16
62,747
48,036
4,589
115,556
16,649

%chg
14.5
4.9
10.2
12.0
0.8

Total Domestic Auto Sales

35,305

31,087

13.6

34,991

0.9

146,266

132,205

10.6

4,153

3,565

16.5

4,020

3.3

14,722

12,014

22.5

39,458

34,652

13.9

39,011

1.1

160,988

144,219

11.6

10.5

10.3

9.1

8.3

Tractors - Domestic

16,452

14,273

15.3

28,797

-42.9

88,101

73,423

20.0

- Exports
Total Tractors
Exports as % of sales

1,101
17,553
6.3

1,187
15,460
7.7

-7.2
13.5

1,394
30,191
4.6

-21.0
-41.9

4,047
92,148
4.4

4,395
77,818
5.6

-7.9
18.4

Exports
Total Auto Sales

10

Exports as % of sales

Source: SIAM, ICICIdirect.com Research

Jul-16

Jun-16

May-16

Apr-16

Mar-16

Feb-16

Jan-16

Dec'15

Nov'15

Oct'15

Sep'15

Aug'15

Jul'15

10.3

Source: Company, Siam

ICICI Securities Ltd. | Retail Equity Research

Page 10

Top model wise volumes for July 2016

Exhibit 19: Top 10 passenger vehicle Models sold in India (in units)
S.No.
1

Models
Alto

Jul-15
22,212

Models
Alto

Jul-16
19,844

DZIRE

19,716

DZIRE

16,170

Swift

18,870

Wagon R

15,207

Wagon R

15,540

Swift

13,934

Elite i20

10,031

Grand i10

11,961

Grand i10

8,691

VITARA BREZZA

10,232

Celerio

7,784

Elite i20

9,910

Omni

7,436

Kwid

9,897

Creta

6,783

Baleno

9,120

10

Jazz

6,676

Omni

8,564

Models
Activa

Jul-16
256,173

Source: Siam

Exhibit 20: Top 10 two-wheelers Models sold in India (in units)

S.No.
1

Models
Activa

Jul-15
225,704

Splendor

177,016

Splendor

197,760

Passion

94,291

HF Deluxe

101,708

HF Deluxe

77,264

Glamour

75,088

CB Shine

63,695

TVS XL Super

74,990

Glamour

61,221

Passion

63,229

TVS XL Super

59,863

CB Shine

56,892

Pulsar

50,270

Jupiter

46,557

Jupiter

43,617

Pulsar

44,002

CT

42,829

CT

41,301

10
Source: Siam

ICICI Securities Ltd. | Retail Equity Research

Page 11

News & views

Hero MotoCorps (HMCL), promoter group and its members have

realigned their businesses to achieve future growth and expansion. On
August 16, 2016, Sunil Kant Munjal resigned from the company's
board of directors as his tenure as the Joint Managing Director came
to an end. According to the HMCL management, the realignment will
not impact the overall promoter shareholding, strategic direction or
operational management of the company

Some major developments at Maruti Suzuki (MSIL): 1) The company

expects Nexa to contribute 15% of MSIL sales by 2020. Launched in
July 2015, Nexa has rapidly grown to 150 showrooms across 94 cities
and > 1 lakh cars have been sold through Nexa dealership, which is
~10% of MSIL's total domestic sales. 2) MSIL launched its LCV,
named Super Carry, at three locations (Kolkata, Ahmedabad &
Ludhiana) which has a capacity of 800 cc diesel vehicle and is priced
at ~| 4 lakh (ex- showroom). It will be sold through a new sales
channel. The company has invested about | 300 crore towards the
development of this LCV. 3) MSIL is planning to transport vehicles
through inland waterways and has inked a pact with the government
for the same. This will help MSIL reduce its logistic costs

Ashok Leylands (ALL) new vehicle assembling facility in Kenya will

commence in the next eight to 12 months. The company is investing
around $5million in the facility, for manufacturing trucks and buses. It
is also setting up a facility in Bangladesh and expanding the existing
one in UAE. In another development, R Seshasayee, non-executive
Vice Chairman of the company, has resigned from the Board of
Directors of the Company with effect from July 28, 2016

ICICI Securities Ltd. | Retail Equity Research

Page 12

ICICIdirect.com Research Universe (Auto & Auto ancillary)

CMP
(|)
TP(|) Rating
Sector / Company
Amara Raja (AMARAJ)
894
900 Hold
Apollo Tyre (APOTYR)
176
180 Hold
Ashok Leyland (ASHLEY)
89
110
Buy
Bajaj Auto (BAAUTO)
2885 2950
Buy
Balkrishna Ind. (BALIND)
755
675 Hold
Bharat Forge (BHAFOR)
862
840 Hold
Bosch (MICO)
23709 24700 Hold
Eicher Motors (EICMOT)
22290 25000
Buy
Exide Industries (EXIIND)
176
195
Buy
Hero Mototcorp (HERHON)
3312 3820
Buy
JK Tyre & Ind (JKIND)
127
110 Hold
M&M (MAHMAH)
1437 1575
Buy
Mahindra CIE (MAHAUT)
185
225
Buy
Maruti Suzuki (MARUTI)
4950 5095
Buy
Tata Motors (TELCO)
501
540
Buy
Wabco India (WABTVS)
6243 6400 Hold
Source: ICICIdirect.com Research

M Cap
(| Cr)
15267
8867
25072
83483
7298
20089
74446
60205
14939
66136
2879
85180
5963
149594
140115
11862

ICICI Securities Ltd. | Retail Equity Research

EPS (|)
FY16 FY17E FY18E
28.6
31.1
38.9
21.5
20.3
22.2
2.5
5.8
6.8
126.2 148.3 175.4
55.7
45.1
56.3
28.0
29.9
39.0
398.7 477.0 616.9
471.5 661.4 813.2
7.3
8.6
10.0
119.5 156.9 186.6
21.0
13.7
22.7
48.3
63.2
72.2
2.7
8.9
11.6
151.3 204.1 242.6
37.2
48.5
58.8
107.9 144.2 182.4

P/E (x)
FY16 FY17E FY18E
31.2 28.8 23.0
8.2
8.7
7.9
35.0 15.4 13.0
21.1 17.9 15.2
12.6 15.5 12.5
30.8 28.8 22.1
60.9 50.9 39.3
47.3 33.7 27.4
24.0 20.4 17.6
27.7 21.1 17.7
6.0
9.3
5.6
29.7 22.7 19.9
68.3 20.7 16.0
32.7 24.3 20.4
12.2
9.4
7.7
57.9 43.3 34.2

EV/EBITDA (x)
FY16 FY17E FY18E
19.4 17.8 14.3
4.8
5.6
5.0
12.9
9.8
8.1
15.7 13.6 11.1
7.2
8.1
6.5
14.3 13.9 11.4
39.8 35.4 27.6
24.4 18.9 15.3
13.8 11.6
9.5
14.3 12.2 10.6
4.4
5.3
4.1
17.7 10.5
9.0
17.9 10.9
9.0
15.0 13.1 10.9
3.8
3.1
2.5
40.0 30.1 24.5

RoCE (%)
FY16 FY17E FY18E
31.1 27.6 28.5
20.5 15.3 15.2
23.0 28.1 29.2
35.9 34.4 34.9
18.7 15.9 18.9
16.5 15.6 18.3
15.1 16.0 18.1
42.4 42.5 39.7
18.7 19.8 21.4
45.9 50.4 48.2
21.7 13.2 16.3
14.5 16.0 17.2
7.5 12.9 14.3
22.7 22.5 22.9
17.0 17.1 18.4
19.4 20.9 21.3

RoE (%)
FY16 FY17E FY18E
23.3 21.0 21.6
17.7 15.3 14.6
13.1 24.3 23.6
29.7 29.8 30.0
19.3 15.9 18.9
18.3 17.1 19.4
17.8 17.9 20.4
36.9 37.4 34.2
14.0 14.8 15.4
36.5 39.4 38.3
27.2 15.5 20.9
14.4 15.1 15.4
7.4 13.3 15.6
16.9 19.4 19.5
15.3 15.3 15.7
22.5 24.4 23.8

Page 13

Exhibit 21: Auto raw material index

The in-house raw material index reflects the combination of

RM Auto Index

various input materials (steel, rubber, aluminium, plastics)

240

for OEMs, which have February 2009 as base year at 100.

The chart shows a declining trend in the past. However,

220

from Q1CY16 onwards, prices have started moving

200

northwards, indicating that the benefit of lower input cost

180

has largely peaked out.

167

160
140
120
100
Aug-16

Apr-16

Dec-15

Apr-15

Aug-15

Dec-14

Aug-14

Apr-14

Dec-13

Apr-13

Aug-13

Dec-12

Aug-12

Apr-12

Dec-11

Apr-11

Aug-11

Dec-10

Aug-10

Apr-10

Dec-09

Aug-09

Apr-09

80

Source: Bloomberg, Reuters, Company, ICICIdirect.com Research

Exhibit 22: Currency movements

Volatility in the currency markets is impacting raw material prices for companies with imported
components and lower natural hedges.

180
160
140
120
100
80

US$INR

US$JPY

US$EUR

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd. | Retail Equity Research

Page 14

Aug-16

Apr-16

Dec-15

Aug-15

Apr-15

Dec-14

Aug-14

Apr-14

Dec-13

Aug-13

Apr-13

Dec-12

Aug-12

Apr-12

Dec-11

60

RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns

ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Sector view:
Over weight compared to index
Equal weight compared to index
Under weight compared to index
Index here refers to BSE 500

Pankaj Pandey

Head Research

pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai 400 093
research@icicidirect.com

ICICI Securities Ltd. | Retail Equity Research

Page 15

ANALYST CERTIFICATION
We /I, Nishit Zota, MBA (Finance) and Vidrum Mehta, MBA (Finance) research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report
accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or
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ICICI Securities Ltd. | Retail Equity Research

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