3 February 2010

Research - India
Global Equity

Arun Agarwal
arun@karvy.com

Auto sector - January Volumes

Auto companies have started their new calendar year 2010 on a strong note and continued their robust sales
volume performance in the month of January. Performance during the month of January 2010 was strong on both
YoY and sequential basis. Post sales slump during 3QFY09, January 2009 was the first month when revival started
for the auto sector and the base was low and therefore YoY growth for all the companies has been quite significant.
On sequential basis, majority of the companies have shown growth on account of strong retail demand.
Apprehension of roll back of excise duty during budget coupled festival days considered auspicious (Sankranti in
Sector Update

North India and Pongal in Tamil Nadu) provided the fillip to retail demand. Moving ahead in February, we expect
apprehension related to withdrawal of stimulus package would continue leading to robust retail demand. In the
near term, withdrawal of stimulus package remains a key risk to the sustainability of the current growth momentum.

Jan 2009 Dec 2009 Jan 2010 % YoY % MoM YTD FY09 YTD FY10 % growth
Hero Honda Motors
2W 315,458 375,838 389,802 23.6 3.7 3,039,603 3,803,396 25.1
Bajaj Auto
Motorcycles 109,666 219,920 232,939 112.4 5.9 1,643,815 2,027,298 23.3
Total 2W 110,363 220,429 233,049 111.2 5.7 1,654,549 2,032,001 22.8
3W 21,985 31,575 32,969 50.0 4.4 231,684 277,624 19.8
Total 2W+3W 132,348 252,004 266,018 101.0 5.6 1,886,233 2,309,625 22.4
Exports out of the above 54,027 91,369 71,695 32.7 (21.5) 674,907 748,226 10.9
TVS Motors
Scooters 17,832 21,566 25,509 43.1 18.3 207,236 253,915 22.5
Motorcycles 43,990 49,560 54,698 24.3 10.4 530,527 513,287 (3.2)
Mopeds 31,907 48,575 45,371 42.2 (6.6) 362,690 467,430 28.9
Total sales 93,729 119,701 125,578 34.0 4.9 1,100,453 1,234,632 12.2
Exports 14,000 17,222 16,074 14.8 (6.7) 160,475 126,206 (21.4)
Maruti Suzuki India
A1 (M800) 5,571 2,574 2,494 (55.2) (3.1) 42,878 27,088 (36.8)
A2 (Alto, Ritz, Swift etc.) 46,899 52,236 58,540 24.8 12.1 405,650 518,047 27.7
A3 (SX4, D'zire) 6,590 7,843 8,995 36.5 14.7 59,290 78,608 32.6
MUV (Grand Vitara, Gypsy) 186 259 135 (27.4) (47.9) 5,560 2,970 (46.6)
C (OMNI) 7,759 8,088 10,923 40.8 35.1 64,286 79,782 24.1
Total Domestic 67,005 71,000 81,087 21.0 14.2 577,664 706,495 22.3
Export 4,774 13,804 14,562 205.0 5.5 49,644 120,097 141.9
Total Sales 71,779 84,804 95,649 33.3 12.8 627,308 826,592 31.8
Tata Motors
M&HCV 5,811 15,302 15,702 170.2 2.6 92,531 116,849 26.3
LCV 11,562 18,217 20,255 75.2 11.2 120,021 174,276 45.2
Utility 2,925 1,710 3,538 21.0 106.9 30,750 25,630 (16.7)
Cars 15,406 12,944 22,707 47.4 75.4 126,665 154,554 22.0
Total Domestic 35,704 48,173 62,202 74.2 29.1 369,967 471,309 27.4
Export 1,227 3,454 3,276 167.0 (5.2) 30,293 26,799 (11.5)
Total Sales 36,931 51,627 65,478 77.3 26.8 400,260 498,108 24.4
M&M
UV 13,397 16,999 20,332 51.8 19.6 118,962 175,458 47
3W/Gio 2,823 4,747 7,300 158.6 53.8 37,075 42,298 14
LCV 503 700 801 59.2 14.4 7,383 7,989 8
Logan 597 308 555 (7.0) 80.2 11,453 4,445 (61)
Total Domestic 17,320 22,754 28,988 67.4 27.4 174,873 230,190 32
Export 291 1,247 1,161 299.0 (6.9) 9,099 8,499 (7)
Total Sales 17,611 24,001 30,149 71.2 25.6 183,972 238,689 30
Tractors 9,759 12,439 16,879 73.0 35.7 100,119 144,549 44
Hero Honda Motors (Rs1,568) Rating: Marketperformer Target Price: Rs1,737

Jan 2009 Dec 2009 Jan 2010 % YoY % MoM YTD FY09 YTD FY10 % growth
2W 315,458 375,838 389,802 23.6 3.7 3,039,603 3,803,396 25.1

Hero Honda Motors (HHML) sold 389,802 units during January 2010
versus 315,458 units sold during January 2009 translating into YoY growth
of 23.6%. On sequential basis, HHML recorded 3.7% growth on back of
strong consumer demand. HHML has been a dominant player in the sub
125cc segment but Bajaj Auto's re-entry has once again commenced
competition into the sub 125cc segment. Over the next 2 months the
company is expected to launch 3 new products which in our view coupled
with company's thrust on rural sales would help the company tackle
competition in the medium term.

HHML - 2W sales volume

450,000 80
400,000 70
350,000 60

% YoY growth
300,000 50
Units

250,000 40
200,000 30
150,000 20
100,000 10
50,000 -
- (10)
Jan-09

Jan-10
Jun-09
May-09
Mar-09

Dec-09
Jul-09

Sep-09

Nov-09
Oct-09
Apr-09
Feb-09

Aug-09

Source: SIAM & KSBL Research

2
 Bajaj Auto (Rs1,685) Rating: Outperformer Target Price: Rs2,000

Jan 2009 Dec 2009 Jan 2010 % YoY % MoM YTD FY09 YTD FY10 % growth
Motorcycles 109,666 219,920 232,939 112.4 5.9 1,643,815 2,027,298 23.3
Total 2W 110,363 220,429 233,049 111.2 5.7 1,654,549 2,032,001 22.8
3W 21,985 31,575 32,969 50.0 4.4 231,684 277,624 19.8
Total 2W+3W 132,348 252,004 266,018 101.0 5.6 1,886,233 2,309,625 22.4
Exports out of the above 54,027 91,369 71,695 32.7 (21.5) 674,907 748,226 10.9

Bajaj Auto (BAL) outperformed the industry in the month of January,

primarily on back of low base and new product launches in the motorcycle
segment. During the month of January 2010 the company sold 232,939
motorcycles versus 109,666 motorcycles sold a year ago. Sharp jump in
sales volume is because of BAL's re-entry into the volume driven 100cc
segment backed by improved consumer sentiments. The company sold
~28,000 units of the Pulsar 135cc during January (the 1st month after launch)
and the same helped the company achieve 6% sequential growth in the
motorcycle segment. BAL sold 71,970 units of Pulsar brand and 92,035
units of Discover and the same were 70% of the overall motorcycle sales
versus 60% during December 2009. In the 3W space the company
continued its robust performance with sales of 32,969 units, a YoY growth
of 50%. BAL's export volumes for the quarter stood at 71,695 units and
were down by 21.5% sequentially. We expect the company to continue its
strong growth ahead and outperform the industry in the 2W space.

BAL - 2W sales volume trend BAL - 3W sales volume trend

300,000 120 40,000 60
100 35,000 50
250,000
80 30,000 40
% YoY growth

% YoY growth
200,000 60 25,000 30
units

40
units

150,000 20,000 20
20
100,000 - 15,000 10
(20) 10,000 -
50,000
(40) 5,000 (10)
- (60)
- (20)
Jan-09

Jan-10
Jun-09
May-09

Jul-09

Sep-09

Dec-09
Nov-09
Mar-09

Oct-09
Apr-09
Feb-09

Aug-09

Jan-09

Jan-10
Jun-09
May-09

Jul-09

Sep-09

Dec-09
Nov-09
Mar-09

Oct-09
Apr-09
Feb-09

Aug-09

Source: SIAM & KSBL Research Source: SIAM & KSBL Research

BAL - Export volume trend BAL - Business Mix

120,000 60 100%
50
100,000 80%
40
30
% YoY growth

80,000 60%
20
units

60,000 10 40%
-
40,000
(10) 20%
20,000 (20)
(30) 0%
Jan-09

Jun-09

Jan-10
May-09

Sep-09
Mar-09

Dec-09
Jul-09

Oct-09

Nov-09
Feb-09

Apr-09

Aug-09

- (40)
Jan-09

Jan-10
May-09
Jun-09

Sep-09
Jul-09

Oct-09

Dec-09
Mar-09

Nov-09
Feb-09

Aug-09
Apr-09

2W 3W

Source: SIAM & KSBL Research Source: SIAM & KSBL Research

3
 TVS Motors (Rs73) Not Rated
Jan 2009 Dec 2009 Jan 2010 % YoY % MoM YTD FY09 YTD FY10 % growth
Scooters 17,832 21,566 25,509 43.1 18.3 207,236 253,915 22.5
Motorcycles 43,990 49,560 54,698 24.3 10.4 530,527 513,287 (3.2)
Mopeds 31,907 48,575 45,371 42.2 (6.6) 362,690 467,430 28.9
Total sales 93,729 119,701 125,578 34.0 4.9 1,100,453 1,234,632 12.2
Exports 14,000 17,222 16,074 14.8 (6.7) 160,475 126,206 (21.4)

TVS motors reported overall sales volume of 125,578 units versus 93,729
units and 119,701 units reported during January 2009 and December 2009
respectively. In the motorcycle space the company's sales volume stood
at 54,698 units and was 24% higher on YoY basis. On sequential basis,
motorcycle segment witnessed 10.4% volume growth. Recently the
company launched a new model called Jive and it is expected to further
enhance the sales in the motorcycle segment for the company. For TVS,
Star City and Apache remains the top selling model in the economy and
the premium segment respectively. In the scooters segment, TVS clocked
sales volume of 25,509 units and was higher by 18.3% over December
2009 sales volume of 25,509. TVS has been a strong player in the scooters
segment and the newly launched model - Wego is expected to help the
company continue its strong performance. In the mopeds segment the
company sold 45,371 units but was 6.6% lower on sequential basis. Exports
at 16,074 units were higher by 15% over January 2009 sales volume of
14,000. Overall the company's performance on YoY basis was strong and
moving ahead motorcycle and scooter segment volume are expected to
benefit from the new launches.
Scooters - sales volume trend Motorcycles sales volume trend
35,000 60 70,000 30
25
30,000 50 60,000
20
25,000 40 50,000 15

% YoY growth
% YoY growth

10
20,000 30 40,000
units

5
Units

15,000 20 30,000 -
(5)
10,000 10 20,000 (10)
(15)
5,000 - 10,000
(20)
- (10) - (25)
Jun-09
Jan-09

Jan-10
Sep-09
Jul-09
May-09
Mar-09

Dec-09
Oct-09
Feb-09

Nov-09
Jun-09
Jan-09

Jan-10

Apr-09
Jul-09

Aug-09
Sep-09
May-09
Mar-09

Dec-09
Oct-09
Feb-09

Nov-09
Apr-09

Aug-09

Source: SIAM & KSBL Research Source: SIAM & KSBL Research

Mopeds and Electric 2W sales volume trend Exports sales volume trend
60,000 50 20,000 40
18,000 30
50,000 40
16,000 20
30 14,000
% YoY growth

% YoY growth

40,000 10
20 12,000
-
units
units

30,000 10,000
10 (10)
8,000
20,000 6,000 (20)
-
4,000 (30)
10,000 (10) (40)
2,000
- (20) - (50)
Jun-09
Jan-09

Jan-10
May-09

Dec-09
Sep-09
Jul-09

Nov-09
Mar-09

Oct-09
Apr-09
Feb-09

Aug-09
Jun-09
Jan-09

Jan-10
Sep-09
May-09

Jul-09

Dec-09
Oct-09
Feb-09

Nov-09
Mar-09
Apr-09

Aug-09

Source: SIAM & KSBL Research Source: SIAM & KSBL Research

4
 Maruti Suzuki India (Rs1,374) Rating: Marketperformer Target Price: Rs1,457
Jan 2009 Dec 2009 Jan 2010 % YoY % MoM YTD FY09 YTD FY10 % growth
A1 (M800) 5,571 2,574 2,494 (55.2) (3.1) 42,878 27,088 (36.8)
A2 (Alto, Wagon-R, Estilo,
Ritz, Swift, A-Star) 46,899 52,236 58,540 24.8 12.1 405,650 518,047 27.7
A3 (SX4, D'zire) 6,590 7,843 8,995 36.5 14.7 59,290 78,608 32.6
MUV (Grand Vitara, Gypsy) 186 259 135 (27.4) (47.9) 5,560 2,970 (46.6)
C (OMNI, Eeco) 7,759 8,088 10,923 40.8 35.1 64,286 79,782 24.1
Total Domestic 67,005 71,000 81,087 21.0 14.2 577,664 706,495 22.3
Export 4,774 13,804 14,562 205.0 5.5 49,644 120,097 141.9
Total Sales 71,779 84,804 95,649 33.3 12.8 627,308 826,592 31.8

Maruti Suzuki India (MSIL) sales volume for the month of January 2010 was a
positive surprise. During the month the company reported their highest ever total
sales of 95,649 units and they also reported their highest ever domestic sales volume
of 81,087 units. Domestic sales volume growth was driven by strong performance
in the A2, A3 and C segment. We believe that new launch (Eeco), strong rural sales,
pre-budget purchase, festive days during the month and change in calendar year
were the major reasons for strong 12.8% sequential growth for the company. On
the exports fronts too, the company performed strongly with 14,562 units versus
4,774 units clocked during January 2009. During January the company started
exporting Ritz to Indonesia and similar initiatives should help the company maintain
current export volume in the event of expected slow down in demand from European
countries. Overall we expect the demand for passenger vehicle would remain strong
but with new products slated to be launched by the competitors over the next few
months is expected to lower the current growth momentum for the company.

A2 segment domestic volume trend Domestic sales volume trend

70,000 70 90,000 70
60,000 60 80,000 60
70,000

% YoY growth
50
% YoY growth

50,000 50 60,000
40,000 40 40
units

50,000
units

30,000 30 40,000 30
30,000
20,000 20 20
20,000
10,000 10 10,000 10
- - - -
Jan-09

Jan-10
Jun-09

Sep-09
May-09

Jul-09
Mar-09

Dec-09
Oct-09
Feb-09

Nov-09
Apr-09

Aug-09
Jun-09
Jan-09

Jan-10
Sep-09
May-09

Jul-09

Dec-09
Oct-09
Feb-09

Nov-09
Mar-09
Apr-09

Aug-09

Source: SIAM & KSBL Research Source: SIAM & KSBL Research

Export volume trend Business Mix (Domestic)

16,000 250 100%
14,000 80%
200
12,000
% YoY growth

60%
10,000 150
units

8,000 40%
6,000 100
20%
4,000
50
2,000 0%
Jan-09

Jan-10
Jun-09
May-09

Jul-09

Sep-09

Dec-09
Nov-09
Mar-09

Oct-09

- -
Apr-09
Feb-09

Aug-09
Jan-09

Jan-10
Jun-09
May-09

Sep-09
Jul-09

Dec-09
Oct-09
Nov-09
Feb-09
Mar-09
Apr-09

Aug-09

A1 A2 A3 MUV C

Source: SIAM & KSBL Research Source: SIAM & KSBL Research

5
 Tata Motors (Rs709) Not Rated

Jan 2009 Dec 2009 Jan 2010 % YoY % MoM YTD FY09 YTD FY10 % growth
M&HCV 5,811 15,302 15,702 170.2 2.6 92,531 116,849 26.3
LCV 11,562 18,217 20,255 75.2 11.2 120,021 174,276 45.2
Utility 2,925 1,710 3,538 21.0 106.9 30,750 25,630 (16.7)
Cars 15,406 12,944 22,707 47.4 75.4 126,665 154,554 22.0
Total Domestic 35,704 48,173 62,202 74.2 29.1 369,967 471,309 27.4
Export 1,227 3,454 3,276 167.0 (5.2) 30,293 26,799 (11.5)
Total Sales 36,931 51,627 65,478 77.3 26.8 400,260 498,108 24.4

Tata Motors (TAMO) sales volume for January 2010 was quite strong with
77.3% YoY growth and 26.8% sequential growth. In the passenger car segment
the company sold 22,707 cars which was a remarkable increase over January
2009 and December 2009 sales volumes of 15,406 units and 12,944 units
respectively. Recently launched Manza helped the company achieve their
highest ever monthly sales in the Indigo range cars since their launch in 2002.
Furthermore the Indica range cars and the Sump/Safari range UV recorded
their highest ever monthly sales in fiscal FY10. In the LCV segment the company
sold 20,255 units and continued its robust performance during FY10. In the
M&HCV segment the company continued to maintain strong sales volume at
15,702 units. Company's exports increased from 1,227 units in January last
year to 3,276 units. Overall the company's performance was very strong in
both the commercial vehicles and the passenger vehicles segment.

M&HCV - domestic volume trend LCV - domestic volume trend

18,000 250 25,000 % YoY growth 120
16,000 200 100
14,000 20,000
150 80
% YoY growth

12,000 60
100 15,000
units

10,000
units

40
8,000 50 10,000 20
6,000
- -
4,000 5,000
2,000 (50) (20)
- (100) - (40)
Jan-09

Jan-10
Jun-09

Dec-09
Sep-09
May-09

Jul-09
Mar-09

Oct-09
Apr-09
Feb-09

Nov-09
Aug-09
Jan-09

Jan-10
Jun-09

Dec-09
Sep-09
May-09

Jul-09
Mar-09

Oct-09
Apr-09
Feb-09

Nov-09
Aug-09

Source: SIAM & KSBL Research Source: SIAM & KSBL Research

Cars - domestic volume trend Business Mix ( Domestic)

25,000 60 100%
50
20,000 80%
40
% YoY growth

30 60%
15,000
units

20 40%
10,000 10 20%
-
5,000 0%
(10)
Jun-09
Jan-09

Jan-10
Sep-09
May-09
Mar-09

Dec-09
Jul-09

Oct-09
Feb-09

Nov-09
Apr-09

Aug-09

- (20)
Jun-09
Jan-09

Jan-10
May-09

Jul-09

Dec-09
Sep-09

Nov-09
Mar-09

Oct-09
Apr-09

Aug-09
Feb-09

M&HCV LCV UV Cars

Source: SIAM & KSBL Research Source: SIAM & KSBL Research

6
 Mahindra and Mahindra (Rs1,020) Not Rated

Jan 2009 Dec 2009 Jan 2010 % YoY % MoM YTD FY09 YTD FY10 % growth
UV 13,397 16,999 20,332 51.8 19.6 118,962 175,458 47
3W/Gio 2,823 4,747 7,300 158.6 53.8 37,075 42,298 14
LCV 503 700 801 59.2 14.4 7,383 7,989 8
Logan 597 308 555 (7.0) 80.2 11,453 4,445 (61)
Total Domestic 17,320 22,754 28,988 67.4 27.4 174,873 230,190 32
Export 291 1,247 1,161 299.0 (6.9) 9,099 8,499 (7)
Total Sales 17,611 24,001 30,149 71.2 25.6 183,972 238,689 30
Tractors 9,759 12,439 16,879 73.0 35.7 100,119 144,549 44

Mahindra and Mahindra (M&M) continued its dominance in the UV

segment on back of strong demand for Bolero, Scorpio and Xylo models.
UV sales for the month stood at 20,332 units which was 52% higher on
YoY and 20% higher on MoM basis. Recently launched Gio helped the
company increase its sales in the 3W/Gio segment from 2,823 units to
4,747 units on YoY basis and on sequential basis too the growth was
significantly high at 54%. Moving ahead the company is expected to benefit
from is new product in the LCV space called Maxximo. M&M's tractor
sales were also very strong at 16,879 units versus 9,759 units sold a year
ago. During the month the company benefitted from the start of harvesting
season and the same lead to sharp sequential growth of 35.7% for the
company. M&M continues to excel in the UV segment and is looking to
strengthen its foothold in the sub 1 tonne LCV segment.

UV - domestic volume trend Tractor - volume trend

25,000 140 20,000 160
120 18,000 140
20,000 16,000
100 120
% YoY growth

% YoY growth
14,000
15,000 80 12,000 100
units

units

60 10,000 80
10,000 40 8,000 60
6,000
20 40
5,000 4,000
- 2,000 20
- (20) - -
Jan-10
Jun-09
May-09

Sep-09

Dec-09
Jul-09

Oct-09

Nov-09
Apr-09

Aug-09

Jan-10
Jun-09
May-09

Sep-09
Jul-09

Dec-09
Oct-09

Nov-09
Apr-09

Aug-09

Source: SIAM & KSBL Research Source: SIAM & KSBL Research

Domestic volume trend (ex tractor) Export volume trend (ex tractor)
35,000 140 1,400 350
30,000 120 300
1,200
100 250
% YoY growth

25,000 1,000
% YoY growth

80 200
20,000 800
units

60 150
units

15,000 40 600 100

20 50
10,000 400
- -
5,000 (20) 200 (50)
- (40) - (100)
Jan-10
May-09

Jun-09

Dec-09
Sep-09

Nov-09
Jul-09

Jan-10
Oct-09
Apr-09

Aug-09

Jun-09

Sep-09
May-09

Jul-09

Dec-09
Oct-09

Nov-09
Apr-09

Aug-09

Source: SIAM & KSBL Research Source: SIAM & KSBL Research

7
Research Desk (Tel: 91-22-22895000)
Hemindra Hazari Head of Research hemindra.hazari@karvy.com

Institutional Sales (Tel: 91-22-22895000)

N Subramaniam Head of Institutional Sales n.subramaniam@karvy.com

Stock Ratings Absolute Returns Stock Ratings Absolute Returns

Buy : > 25% Market Performer : 0 - 15%
Out Performer : 16 - 25% Under Performer : < 0%
Sell : <(25%)

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