Sector View Decent start to new year…content.icicidirect.com/mailimages/IDirect_Motogaze_Feb16.pdf>15 year old CV); higher incentives for electric vehicles and higher agriculture

ICICI Securities Ltd. | Retail Equity Research

February 26, 2016

MotoGaze February 2016

Decent start to new year… The New Year started on a decent note, with overall auto volumes for January 2016, up 3.1% YoY. The PV space for January 2016, took a breather (down 0.6% YoY) after registering strong growth in 2015, mainly after market leader MSIL reported de-growth of 2.6% YoY. The CV space continued with its growth momentum, up 19.3% YoY, supported by growth in M&HCV volume up 31.9% YoY. LCV registered growth of 10.9% YoY. The 2-W space reported growth of 3.5% YoY, supported by growth in the scooter segment, which was up 11.3% YoY. HMCL reported volume growth of 0.8% YoY. The 3-W volumes continued to remain weak, down 3.1% YoY as export volumes were down 20.1% YoY. Tractor volumes remained flat for January 2016. We expect the auto sector to benefit from Union Budget 2016-17; as positive steps like scrappage policy (banning >15 year old CV); higher incentives for electric vehicles and higher agriculture spend & increase in rural wages are expected in the Budget, which is likely to spur growth. However among negatives, higher duty on diesel vehicles (to reduce pollution) may impact some OEMs.

Macro tailwinds likely to pick up with economic revival!

Going ahead, with an improvement in overall economic activity, we believe macro headwinds like interest rate and inflation are turning positive and would help the industry. Both CPI and WPI have shown a considerable decline over the last year, which gives RBI adequate room to further cut rates as global crude prices have also corrected sharply.

New launches + improved sentiment + pay commission = growth

On a YTD basis, overall auto volumes grew 2.2% YoY, largely due to PV & CV space, which posted growth of 6.8% YoY & 10.5% YoY, respectively. The 2-W volumes were up 1.3% YoY while 3-W volumes remained largely flat, down 0.4% YoY. The auto industry is expected to witness some signs of recovery, going forward. New product launches and refreshes across segments & companies and improved sentiments may lead to this turnaround in demand for OEMs. We remain upbeat on the overall auto space as volumes are likely to recover, going forward. The sector is expected to see the positive impact of the Seventh Pay Commission that will incrementally bring volume growth of ~16% in the next two years.

Industry outlook

With expectation of an improvement in demand sentiments, we expect the overall industry to grow 2-3% YoY in FY16E. We believe the PV space will grow 7-9% YoY. The strong growth momentum in M&HCV volumes is likely to continue (expect 16-18% YoY growth) while the LCV segment is expected to recover in FY16E. The 2-W segment is likely to grow 1-2% YoY, mainly led by growth in the scooter segment, which would be offset by subdued growth in the motorcycle segment. Tractor industry volumes are expected to decline >10% in FY16E. 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. On the basis of index performance, for January 2016, the BSE Auto index was down ~8% YoY, underperforming the Sensex, which was down ~4.8%. Among our I-direct auto coverage, we remain bullish on frontline OEM stocks like Eicher Motors, Tata Motors, Maruti Suzuki and M&M. However, with the favourable impact of operating leverage due to increased demand as well as lower raw material prices, the earnings growth trajectory for ancillary stocks is likely to remain on the uptrend.

Sector View

Equal weight

Volume performance…

Company Gr. YoY(%)Hero Motocorp 0.8Bajaj Auto 1.8TVS Motors -1.4Maruti Suzuki -2.6Tata Motors 10.5Mahindra and Mahindra 9.7Ashok Leyland 30.5

Key players & industry volume growth – Jan’16 (%)

-1.2

30.5

9.0

12.8

1.7

-7.7

18.0

-4.7

17.7

15.5

-31.014.2

-2.6

3.1

0.8

1.8

-1.4

-8.1

10.5

9.7

Industry

HMCL

BAL

TVS

HMSI

Maruti

TML

M&M

Hyundai

ALL

MoM gr

YoY gr

Source: Siam

Key players & industry volume growth YTD (%)

2.1

-2.5

-0.2

4.0

0.1

11.3

1.44.1

6.1

35.6

Industry

HMCL

BAL

TVS

HMSI

Maruti

TML

M&M

Hyundai

ALL

YTD gr

Source: Siam

Research Analyst

Nishit Zota [email protected] Vidrum Mehta [email protected]


Page 2

Two & three wheeler industry In January 2016, 2-W volumes were up 3.5% YoY, mainly after strong growth in the scooter segment was offset by subdued growth in the motorcycle space. The scooter segment registered 11.3% YoY after HMCL reported strong growth of 20.5% YoY while market leader HMSI’s volume was up 5.9% YoY. India Yamaha Motor reported strong scooter volumes (29,382 units vs. 12,087 units YoY) that can be attributed to “Fascino” with strong volumes of 17,966 units. The motorcycle segment reported subdued growth of 0.6% YoY. The moped segment declined 0.4% YoY.

The three-wheeler (3-W) segment at 70,459 units was down 3.1% YoY, mainly on the back of weak exports, which were down 20.1% YoY to 26,782 units. In contrast, domestic volumes registered growth of 11.5% YoY to 43,677 units. Domestic 3-W volumes were mainly driven by market leader BAL, which reported volume growth of 25% YoY. Atul Auto (AAL), largely a domestic player, reported domestic growth of 7.4% YoY.

Market share movement According to data released by the Society of Indian Automobile Manufacturers (Siam), the domestic market share of two and three-wheeler players as of January 2016 is mentioned below.

Exhibit 1: Domestic market share movement in two-wheelers

11.3

40.4

13.1

26.2

9.0

11.7

38.8

13.5

26.1

9.911.5

38.9

13.4

26.2

10.0

0

5

10

15

20

25

30

35

40

45

Bajaj Auto Hero MotoCorp TVS Motors HMSI Others

(%)

Jan-15 Dec-15 Jan-16

Source: Siam, Data used is YTD

Exhibit 2: Domestic market share movement in three-wheelers

44.5

32.2

10.5

12.8

46.2

30.6

10.6

12.7

46.4

30.4

10.5

12.7

0 5 10 15 20 25 30 35 40 45 50

Bajaj Auto

Piaggio

M&M

Others

(%)



The 2-W segment is witnessing an overall slowdown due

to weak rural demand. HMCL, which derives ~50% of its

volumes from rural areas, is losing its share against some

of its peers

In January 2015, domestic 3W volumes grew 11.5% YoY.

The top two players in the space viz. BAL & Piaggio

continue to maintain their strong leadership position


Page 3

Exhibit 3: Domestic market share movement in motorcycles

16.7

52.9

6.2

16.117.8

52.3

6.7

14.017.7

52.4

6.7

14.1

0

10

20

30

40

50

60

Bajaj Auto Hero Motocorp TVS motor Honda

(%)


Source: Company, ICICIdirect.com Research

Exhibit 4: Domestic market share movement in scooters/scooterettes

16.8 15.3

55.0

12.915.0 15.7

56.1

13.215.5 15.5

55.9

13.1

0

10

20

30

40

50

60

70

Hero Motocorp TVS Motors Honda Others

(%)



The overall motorcycle segment is facing growth

challenges, with volumes flat (up 0.6% YoY) in January

2016. Hero MotoCorp maintained its leadership position in

the domestic market with a share of ~52%. Bajaj Auto has

seen a good comeback in the domestic market and

witnessed an improvement in its share by 100 bps YoY to

~17.7%

The scooter segment continued to outperform the motorcycle

segment witnessing growth of 11.3% YoY for January 2016.

However, over the last couple of months, the overall scooter

volume growth has moderated. The market leader HMSI

volumes reported decent growth of 5.9% YoY but lost market

share of ~20 bps MoM to 55.9%. New launches by HMCL

supported its market share, which expanded ~50 bps MoM

to 15.5%


Page 4

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

17.0

60.5

7.3

15.2

0

10

20

30

40

50

60

70

Jan-

14Fe

b-14

Mar

-14

Apr-1

4M

ay-1

4Ju

n-14

Jul-1

4Au

g-14

Sep-

14Oc

t-14

Nov

-14

Dec-

14Ja

n-15

Feb-

15M

ar-1

5Ap

r-15

May

-15

Jun-

15Ju

l-15

Aug-

15Se

p-15

Oct-1

5N

ov-1

5De

c-15

Jan-

16

(%)

0

4

8

12

16

20

(%)

Bajaj Auto (RHS) Hero Motocorp (LHS) TVS (RHS) HMSI (RHS)

Source: Siam * only top 4 two-wheeler OEMs

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

77.3

5.5

17.3

10.4

0

10

20

30

40

50

60

70

80

90

Jan-

14

Feb-

14

Mar

-14

Apr-1

4

May

-14

Jun-

14

Jul-1

4

Aug-

14

Sep-

14

Oct-1

4

Nov

-14

Dec-

14

Jan-

15

Feb-

15

Mar

-15

Apr-1

5

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct-1

5

Nov

-15

Dec-

15

Jan-

16

(%)

0

5

10

15

20

25

30

35

(%)

Bajaj Auto (LHS) Hero Motocorp (RHS) TVS (RHS) HMSI (RHS)

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

HMCL continues to dominate the executive motorcycle

segment (<=125 cc) in India. HMCL’s market share has seen an up-tick to ~60%.


Page 5

Hero MotoCorp (HERHON) • Hero MotoCorp volumes were up 0.8% YoY at 563,706 units.

HMCL’s volumes were impacted mainly due to the overall slowdown in the rural space, which accounts for ~50% of its total volumes. We believe new product launches/refreshes are likely to improve HMCL’s volumes, thereby gaining market share.

• The motorcycle segment at ~4.7 lakh units declined 2.3% YoY.

New product launches helped its scooters volumes to increase 20.4% YoY to 0.94 lakh units. Volumes of Maestro grew 21.8% YoY to 54,589 units. This was partially offset by volumes of Pleasure, which were down 55.5% YoY to 14,806 units. The newly launched Duet clocked strong volumes of 24,709 units

• Export volumes grew 32.6% YoY to 16,991 units, largely on the

back exports of Maestro and Duet. The management continues to focus on exports market. It is likely to expand its global footprint by entering 50 markets with the target of selling 12 million units (~10% of total volume) by FY20E

Exhibit 7: Volume performance (in units) Segment Jan-16 Jan-15 %chg Dec-15 %chg YTD'16 YTD'15 %chgMotorcycles 469,692 480,894 -2.3 406,300 15.6 4,764,592 4,968,493 -4.1Scooters 94,014 78,088 20.4 93,365 0.7 709,716 646,727 9.7Total Sales 563,706 558,982 0.8 499,665 12.8 5,474,308 5,615,220 -2.5Export(inc. above) 16,991 12,813 32.6 23,653 -28.2 172,826 176,760 -2.2Exports (% of sales) 3.0 2.3 72 bps 4.7 -172 bps 3.2 3.1 1 bpsSource: Company, Siam

Bajaj Auto (BAAUTO) • Bajaj Auto’s (BAL) total 2-W volumes were up 2.4% YoY. The

company outperformed the domestic motorcycle industry, with 9.2% YoY growth. This helped BAL to expand its market share significantly from <16% in March 2015 to the current ~18%. Volumes of CT grew came to 43,598 units vs.13,058 YoY. The newly launched “Avenger” had strong volumes of 28,085 units.

• Overall 3-W volumes declined 2% YoY; mainly after 25.1% YoY

domestic volume growth was offset by decline of 20.2% YoY in export market, mainly due to forex availability in overseas markets

• BAL expects to outperform the domestic motorcycle industry in

FY16E mainly on the back of its new offerings and its focus on the economy and premium segments. On the export front, the volume target is 2 million units for FY16E. However, we believe it would be challenging for BAL to meet the same

Exhibit 8: Volume performance (in units) Segment Jan-16 Jan-15 %chg Dec-15 %chg YTD'16 YTD'15 %chgTotal 2-wheeler sales 252,988 246,955 2.4 247,782 2.1 2,858,721 2,866,070 -0.32W exports 112,135 118,000 -5.0 127,460 -12.0 1,286,331 1,354,418 -5.02W domestic sales 140,853 128,955 9.2 120,322 17.1 1,572,390 1,511,652 4.0Total 3-wheeler sales 40,951 41,791 -2.0 41,207 -0.6 456,261 454,208 0.53W exports 19,934 24,992 -20.2 18,003 10.7 252,740 240,048 5.33w domestic sales 21,017 16,799 25.1 23,204 -9.4 203,521 214,160 -5.0Total Sales 293,939 288,746 1.8 288,989 1.7 3,314,982 3,320,278 -0.2Total Domestic Sales 161,870 145,754 11.1 143,526 12.8 1,775,911 1,725,812 2.9Total Exports 132,069 142,992 -7.6 145,463 -9.2 1,539,071 1,594,466 -3.5Exports as % of sales 44.9 49.5 -459 bps 50.3 -540 bps 46.4 48.0 -159 bpsSource: Company, Siam

Hero MotoCorp: Sales volumes

481

416 47

247

6 517

484

433

427 54

253

147

840

6 470

7869

58 59 54 5365

108

72

93 94

60

53

0

100

200

300

400

500

600

Jan'

15

Mar

'15

May

'15

Jul'1

5

Sep'

15

Nov

'15

Jan-

16

('000

s)

0

20

40

60

80

100

120

('000

s)

Motorcycles Scooters

Source: Siam, ICICIdirect.com Research

Bajaj Auto: Sales volumes

247

216

210 28

6

302

288

282

290 33

0

309

271

248

253

42

27 41

50 44 44 48 52

54

44

39

41 41

50

46

39

48

4647

50

53

45

36

44

50

45

0

50

100

150

200

250

300

350

400

450

Jan'

15

Mar

'15

May

'15

Jul'1

5

Sep'

15

Nov

'15

Jan-

16

('000

s)

30

35

40

45

50

55

(%)

Two-Wheelers Three-Wheelers % exports



Page 6

TVS Motors (TVSSUZ) • TVS’ volumes (2-W+3-W) for January 2016, at ~2.1 lakh units,

were up 10.6% YoY. The 2-W volumes grew 10.9% YoY while 3-W volumes increased 4.2% YoY for January 2016

• The motorcycle segment volume grew 19.9% YoY to 83,374 units.

This was mainly as volumes of Starcity grew 15.8% YoY to 28,745 units & volumes of Apache grew 18.9% YoY to 27,649 units. The scooter segment registered strong growth of 14.1%, mainly driven by Jupiter (up 29.6% YoY to 43,126 units) & Zest (up 15% YoY to 8,618 units). Moped volumes declined 3.2% YoY to 55,307 units

• Overall export (17.3% of sales) volumes grew 39.1% YoY to

34,823 units. This was after growth of 51.2% in 2-W export. The 3-W export declined 0.8% YoY, in January 2016

Exhibit 9: Volume performance (in units) Segment Jan-16 Jan-15 %chg Dec-15 %chg YTD'16 YTD'15 %chgMotorcycles 83,374 69,564 19.9 71,435 16.7 852,938 810,951 5.2Scooters 62,552 54,830 14.1 65,090 -3.9 678,017 596,723 13.6Mopeds 55,307 57,122 -3.2 57,541 -3.9 620,281 639,601 -3.0Total 2-W Sales 201,233 181,516 10.9 194,066 3.7 2,151,236 2,047,275 5.13-Wheelers 7,252 6,961 4.2 8,020 -9.6 96,628 88,399 9.3Total Sales 208,485 188,477 10.6 202,086 3.2 2,247,864 2,135,674 5.3Exports(incl. in above) 34,823 25,029 39.1 32,771 6.3 388,625 335,120 16.0Exports as % of sales 17.3 13.8 16.9 18.1 16.4Domestice sales 166,410 156,487 6.3 161,295 3.2 1,762,611 1,712,155 2.9Source: Company, Siam

Honda Motorcycles & Scooters India (HMSI) • HMSI’s January 2016 performance was much below its peers.

Overall volumes were down 8.1% YoY to 361,739 units led by de-growth of 15.6% YoY in motorcycle segment. The modest growth in the scooter space, up 3.3% YoY, further resulted into loss of market share by 20 bps MoM to 55.9%

• Motorcycle volumes continue to remain a key challenge for HMSI.

The segment declined 15.6% YoY, led by a sharp drop in sales of its older CB series & Dream. The newly launched LIVO volumes came in at 22,762 units. Scooter segments volume grew 3.3% YoY to 235,967 units, led by 6.4% YoY growth in Activa & 20.2% YoY growth in Dio. Volumes of Aviator declined 28.2% YoY

• Export volumes grew 3.1% YoY to 16,976 units, as scooter

volumes grew 132% YoY. However, the same was offset by 48% de-growth in its motorcycle exports. With HMSI’s focus more on domestic markets, the segment remains a small part of the company’s volume pie contributing 4.7% of total volumes

Exhibit 10: Volume performance (in units) Segment Jan-16 Jan-15 %chg Dec-15 %chg YTD'16 YTD'15 %chgMotorcycles 125,772 148,956 -15.6 98,839 27.2 1,288,611 1,519,114 -15.2Scooters 235,967 228,369 3.3 207,768 13.6 2,351,621 2,086,806 12.7Total Sales 361,739 393,787 -8.1 306,607 18.0 3,697,080 3,692,302 0.1Exports(incl.above) 16,975 16,462 3.1 16,067 5.7 166,311 154,741 7.5Exports as % of sales 4.7 4.2 51 bps 5.2 -55 bps 4.5 4.2 31 bpsDomestice sales 344,764 377,325 -8.6 290,540 18.7 3,530,769 3,537,561 -0.2

Source: Company, Siam

TVS Motors: Sales volumes

70 74 77 75 91 89 77 87 90 106

82 71 83

55 57 55 49

54 61 70 73 75

91

76

65 63

57 64 69 72

65 61 61 57 55

77

60

58 55

0

50

100

150

200

250

300

Jan'

15

Mar

'15

May

'15

Jul'1

5

Sep'

15

Nov

'15

Jan-

16

(%)

Motorcycles Scooters Mopeds


HMSI: Motorcycles & scooter sales volumes

149

139

146

131

138

121

121

139

147

162

104

99 126

228

209 23

9

198 21

5

227 26

8 257 264 27

0

208

208 23

6

0

50

100

150

200

250

300

350

400

450

Jan'

15

Mar

'15

May

'15

Jul'1

5

Sep'

15

Nov

'15

Jan-

16

('000

s)

Motorcycles Scooters



Page 7

Four-wheeler industry The overall passenger vehicles segment for January 2016 declined 0.6% YoY to 274,100 units. The domestic PV space remained flat, up 0.6% YoY while exports volumes declined 6.7% YoY during January 2016. Within the overall PV space, three sub-segments viz. cars reported a volume de-growth of 4.3% YoY while, on the other hand, utility vehicles (UVs) & vans reported volume growth of 12.5% YoY and 7.9% YoY, respectively. MSIL underperformed the PV space, with volume de-growing by 2.6% YoY. For January 2016, utility vehicle (UV) volumes were up 12.5% YoY to 58,105 units, outperforming the overall PV market. The UV1 sub-segment registered growth of 38.5% YoY to 42,200 units, mainly driven by new product launches (Hyundai’s Creta volumes at 8,468 units, Ford’s Ecosport volumes at 7,927 units and M&M’s TUV300 & KUV100 volumes at 3,816 units & 3,413 units, respectively, for January 2015). The UV2 segments volumes declined 25.8% YoY to 13,975 units, which mainly includes M&M (includes Bolero Plus, Xylo, Scorpio & XUV500) and Toyota (Innova), whose volumes declined 25% YoY & 37% YoY respectively. The commercial vehicles segment witnessed growth of 19.3% YoY to 71,106 units. The M&HCV segment grew 31.9% YoY to 31,668 units, driven by growth in market leaders like Tata Motors and Ashok Leyland. The surprise was from the LCV segment, which witnessed a strong recovery with volumes up 10.9% YoY to 39,438 units due to strong growth in M&M and Tata Motors LCV volumes.

Market share movement

According to Siam, the domestic market share for passenger vehicles (PV) and commercial vehicles (CV) in January 2016 was as follows: Exhibit 11: Domestic market share movement in passenger vehicles

45.1

16.2

6.1

8.6

2.1

21.9

47.0

17.6

5.4

7.9

1.2

20.8

46.9

17.5

5.4

8.1

1.2

20.9

0 5 10 15 20 25 30 35 40 45 50

Maruti

Hyundai

Tata Motors

M&M

GM

Others

(%)


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

New product launches helped the top two passenger

vehicle players in India. MSIL continues to dominate the

passenger vehicle segment with market share of ~47%.

Positive consumer response to Creta has helped Hyundai

increase its market share by ~130 bps YoY to 17.5%


Page 8

Exhibit 12: Market share movement in A2 segment

29.4 27.1

63.8 66.7

0

10

20

30

40

50

60

70

80

Jan-

14

Feb-

14

Mar

-14

Apr-1

4

May

-14

Jun-

14

Jul-1

4

Aug-

14

Sep-

14

Oct-1

4

Nov

-14

Dec-

14

Jan-

15

Feb-

15

Mar

-15

Apr-1

5

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct-1

5

Nov

-15

Dec-

15

Jan-

16

(%)

Hyundai Maruti

Source: Siam, Top two PV OEMs considered

Exhibit 13: Domestic market share movement in commercial vehicles

14.2

25.7

47.5

12.6

18.0

25.1

44.0

12.8

18.3

24.9

44.2

12.5

0

5

10

15

20

25

30

35

40

45

50

ALL M&M Tata Motors Others

(%)


Source: Siam Data used is YTD

Exhibit 14: Segmental share in CVs

31.8

44.5

68.2

55.5

0

10

20

30

40

50

60

70

80

Jan-

14

Feb-

14

Mar

-14

Apr-1

4

May

-14

Jun-

14

Jul-1

4

Aug

-14

Sep-

14

Oct-1

4

Nov

-14

Dec-

14

Jan-

15

Feb-

15

Mar

-15

Apr-1

5

May

-15

Jun-

15

Jul-1

5

Aug

-15

Sep-

15

Oct-1

5

Nov

-15

Dec-

15

Jan-

16

(%)

M&HCV LCV

Source: Siam

The A2 segment is the bread & butter category of the

passenger car segment. The segment growth has

moderated over the last couple of months owing to a lack

of options among diesel variants

The M&HCV segment continued to show growth traction.

On the other hand, LCV surprised us positively with

volumes up 10.9% YoY in January 2016. The overall growth

of 19.3% YoY in the CV segment was driven by both

M&HCV and LCV volumes, which were up in January 2016

The strong volume growth witnessed in the M&HCV

segment over the last year led the MHCV/LCV ratio in

January 2016 to come in at 45:55 against 40:60 in January

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

tilted towards M&HCV, as the industry witnessed some

pre-buying due to implementation of ABS from October 1, 2015


Page 9

Tata Motors (TELCO)

• Tata Motors’ standalone volumes grew 10.5% YoY to 47,035 units. Growth in the CV and export market was largely offset by the PV segment dragging overall volumes.

• Domestic M&HCV volumes grew 30.3% YoY while LCV volumes positively surprised us, growing 11.7% YoY. The domestic car segment declined 19.7% YoY, as volumes of Indigo CS; Bolt & Zest declined 29.1%, 52.6% & 25.9% YoY, respectively. Export volumes were up 42.3% YoY, led by growth in CV exports

• JLR’s wholesale volumes were up 24.7% YoY at 50,972 units. Jaguar volumes were up 61.9% YoY to 8,576 units, driven by XE volumes ~3,600 units. Land Rover volumes were up 18.3% YoY to 36,959 units, driven by Discovery Sport ~9,500 units & Defender ~2,267 units. Region wise, the Europe & UK markets reported growth of ~36% & ~65% YoY, respectively. The Chinese market reported volume growth of 5.4% YoY; & remains a challenge

Exhibit 15: Volume performance (in units)

Segment Jan-16 Jan-15 %chg Dec-15 %chg YTD'16 YTD'15 %chgDomestic MHCV 14,693 11,273 30.3 12,673 15.9 123,551 99,943 23.6Domestic LCV 15,977 14,301 11.7 14,674 8.9 134,857 159,727 -15.6Domestic Pass.Car Sa 9,350 11,637 -19.7 6,900 35.5 91,648 84,688 8.2Domestic UV 1,378 1,410 -2.3 1,169 17.9 15,357 20,703 -25.8Exports 5,637 3,961 42.3 4,557 23.7 46,570 40,587 14.7Total Sales 47,035 42,582 10.5 39,973 17.7 411,266 405,648 1.4Jaguar 8,576 5,298 61.9 8,784 -2.4 78,489 61,716 27.2Landrover 36,959 31,229 18.3 42,188 -12.4 348,704 316,409 10.2Total JLR Sales 45,535 36,527 24.7 50,972 -10.7 427,193 378,125 13.0

Source: Company, Siam Maruti Suzuki India (MARUTI)

• After nine consecutive quarters of YoY growth, Maruti Suzuki’s volumes declined 2.6% YoY to 113,606 units, underperforming the PV industry which is down (0.6% YoY) in January 2016.

• Domestic volumes grew 0.8% YoY to 106,383 units. The volumes of mini-car segment (Alto & WagonR) declined 4.3% YoY. Its compact car segment (Ritz, Swift, Baleno, Celerio, & DZire) declined 2.8% YoY. Volumes of DZire Tour (used for cabs and fleet operators) were up 157.3% YoY at 3,545 units. Volumes of its S-Cross & Baleno were at 2,038 units & 9, 465 units, respectively

.

• Export volumes declined 34.6% YoY to 7,223 units, with its share coming down to 6.4% of total sales vs. 9.5% in January 2015

Exhibit 16: Volume performance (in units) Segment Jan-16 Jan-15 %chg Dec-15 %chg YTD'16 YTD'15 %chgOmni, Eeco,Versa 10,512 10,113 3.9 11,122 -5.5 118,093 105,904 11.5Swift,Ritz, Celerio, Dzire,Baleno 78,781 81,631 -3.5 84,588 -6.9 812,999 527,233 54.2SX4, Swift Dzire Tour, Ciaz 8,976 7,383 21.6 6,455 39.1 75,211 16,953 343.6Total Passengers 98,269 99,127 -0.9 102,165 -3.8 1,006,303 902,974 11.4Gypsy, Vitara,Ertiga 8,114 6,432 26.2 9,168 -11.5 72,038 56,117 28.4Total Domestic 106,383 105,559 0.8 111,333 -4.4 1,078,341 959,091 12.4Exports 7,223 11,047 -34.6 7,816 -7.6 104,111 103,218 0.9Total Sales 113,606 116,606 -2.6 119,149 -4.7 1,182,452 1,062,309 11.3Exports as % of sales 6.4 9.5 6.6 8.8 9.7Source: Company, Siam. * estimates

Maruti Suzuki India: sales volumes

119

112

112

115

115

122

118

114 13

412

111

911

4

117

9.5

6.4

0

20

40

60

80

100

120

140

Jan'

15

Mar

'15

May

'15

Jul'1

5

Sep'

15

Nov

'15

Jan-

16

('000

s)

0

2

4

6

8

10

12

(%)

Total Sales Export %


Tata Motors: Domestic sales volume

29.3

30.3 37

.1

25.9

28.2

29.5

29.5

28.8 33.0

30.3

28.3

31.7 36.0

13.3

13.9 15

.4

10.3 11

.3

10.7

10.7

11.9 12

.3

13.2

10.6 8.3 11

.1

0

10

20

30

40

50

60

Jan'

15

Mar

'15

May

'15

Jul'1

5

Sep'

15

Nov

'15

Jan-

16

(000

's)

CV Sales PV Sales


Jaguar Land Rover sales volume

50.1

34.9

32.6

45.5

43.0

36.5 38

.5 40.7

38.9

33.1

51.1

48.5 51

.051

.0

0

20

40

60

80

100

Dec'1

4Ja

n'15

Feb'

15M

ar'1

5Ap

r'15

May

'15

Jun'

15Ju

l'15

Aug'

15Se

pt'1

5Oc

t'15

Nov

'15

Dec'1

5Ja

n-16

(% s

hare

of t

otal

vol

umes

)

10152025303540455055

(000

's)

% Jaguar % LR JLR total volumes(RHS)



Page 10

Ashok Leyland (ASHLEY)

• Ashok Leyland (ALL) continued with its strong volume momentum registering growth of 30.5% YoY to 13,884 units. The M&HCV segment continued to show strong traction with volumes up 39.9% YoY to 11,206 units. The LCV segment of ALL reported volume growth of 2.9% YoY to 2,678 units

• The M&HCV goods segment witnessed strong growth of 44.9%

YoY while M&HCV passenger volumes grew by 24.5% YoY

• Overall exports grew 16.6% YoY. Hence, the overall volume share came in at 9.5% vs. 10.6% in January 2015

Mahindra and Mahindra (MAHMAH)

• M&M’s overall automotive volumes were up 9.7% YoY to 43,789 units. Its core UV segment (including exports) grew 13.4% YoY outperforming the industry volumes, which registered growth of 12.5% YoY. This was mainly after the new launches of TUV300 & KUV100 supported its performance

• The newly launched TUV300 & KUV100 volumes came in at 3,816 units and 3,413 units, respectively. However, growth in new launches was offset by the existing by Bolero, Bolero plus, Xylo, Scorpio & XUV500. New launches and facelift continue to hold the key for M&M in the extremely competitive space

• M&M’s tractor volumes grew 1% YoY to 15,065 units, mainly on account of the low base and pent-up demand. Domestic tractor volumes were up 4% YoY to 14,402 units while there was no respite for export volumes, down 37.5% YoY to 663 units. For FY16E, we believe the tractor industry is likely to de-grow by ~10% and expect a gradual recovery in FY17E.

Exhibit 17: Volume performance (in units) Segment Jan-16 Jan-15 %chg Dec-15 %chg YTD'16 YTD'15 %chgM&HCV Passenger 2,426 1,949 24.5 1,796 35.1 19,935 16,222 22.9M&HCV Goods 8,780 6,060 44.9 7,907 11.0 65,784 43,158 52.4LCV 2,678 2,603 2.9 2,451 9.3 24,531 21,678 13.2Passenger Vehicles - 31 NA 0 NA 97 316 -69.3Total Sales 13,884 10,643 30.5 12,154 14.2 110,347 81,374 35.6Exports 1,320 1,132 16.6 855 54.4 10,913 10,449 4.4Exports as % of sales 9.5 10.6 7.0 9.9 12.8Source: Company, Siam

Exhibit 18: Volume performance (in units) Segment Jan-16 Jan-15 %chg Dec-15 %chg YTD'16 YTD'15 %chgUV’s 21,034 18,554 13.4 17,310 21.5 174,465 168,506 3.54-Wheeler pickups 13,297 12,919 2.9 11,530 15.3 133,873 132,750 0.8M & HCV 1,088 796 36.7 935 16.4 10,722 7,104 50.9Verito+Verito Vibe - 250 - - - 2,125 2,382 -Total 4wheeler Sales 36,473 32,519 12.2 30,662 19.0 321,185 310,742 3.43-Wheeler 4,220 4,526 -6.8 4,177 1.0 46,565 47,800 -2.6

Total Domestic Auto Sales 40,693 37,045 9.8 34,839 16.8 367,750 358,542 2.6

Exports 3,096 2,885 7.3 3,076 0.7 29,628 23,051 28.5

Total Auto Sales 43,789 39,930 9.7 37,915 15.5 397,378 381,593 4.1

Exports as % of sales 7.1 7.2 8.1 7.5 6.0

Tractors - Domestic 14,402 13,852 4.0 11,686 23.2 175,413 199,498 -12.1

- Exports 663 1,061 -37.5 1,182 -43.9 9,922 10,836 -8.4Total Tractors 15,065 14,913 1.0 12,868 17.1 185,335 210,334 -11.9Exports as % of sales 4.4 7.1 9.2 5.4 5.2

Source: Company, Siam

Mahindra and Mahindra: Sales volume

39.9

38.0

45.2

36.7

36.7

36.1

34.7 35.6

42.8

51.4

41.6

37.9

43.8

15

20

25

30

35

40

45

50

55

Jan'

15

Feb'

15

Mar

'15

Apr'1

5

May

'15

Jun'

15

Jul'1

5

Aug'

15

Sep'

15

Oct'1

5

Nov

'15

Dec'

15

Jan-

16

(000

's)

Source: SIAM, ICICIdirect.com Research Mahindra and Mahindra: Tractor sales

14.9

11.4

12.3

18.0 19

.3

25.1

15.5

11.7

18.1

28.1

21.7

12.9 15

.1

0

5

10

15

20

25

30

35

Jan'

15

Feb'

15

Mar

'15

Apr'1

5

May

'15

Jun'

15

Jul'1

5

Aug'

15

Sep'

15

Oct'1

5

Nov

'15

Dec'1

5

Jan-

16

(000

's)

Source: SIAM, ICICIdirect.com Research

Ashok Leyland: Total sales

8.0

8.2 10

.1

6.5 6.9 8.0 8.8

8.9 12

.1

7.2

6.3

9.7 11

.2

2.6 2.5

2.7

1.9 2.4 2.

4 2.2 2.6

2.6

2.6

2.7

2.5

2.7

0

2

4

6

8

10

12

14

16

Jan'

15

Feb'

15

Mar

'15

Apr'1

5

May

'15

Jun'

15

Jul'1

5

Aug'

15

Sep'

15

Oct'1

5

Nov

'15

Dec'

15

Jan-

16

(000

's)

M&HCV LCV



Page 11

Model wise volumes – January 2016

Exhibit 19: Top 10 passenger vehicle – Models sold in India (in units) S.No. Models Jan-15 Models Jan-16

1 Alto 22,889 Alto 21,462

2 Swift 19,669 Swift 14,057

3 DZIRE 18,155 DZIRE 14,042

4 Wagon R 12,861 Wagon R 12,744

5 Elite i20 9,541 Grand i10 9,934

6 Grand i10 8,724 Elite i20 9,604

7 Bolero 8,515 City 8,037

8 City 7,671 Baleno 7,698

9 Eon 6,820 Celerio 7,141

10 Amaze 6,709 Creta 6,589 Source: Siam

Exhibit 20: Top 10 two-wheelers – Models sold in India (in units) S.No. Models Jan-15 Models Jan-16

1 Splendor 223,420 Activa 210,123

2 Activa 198,148 Splendor 199,345

3 Passion 102,343 HF Deluxe 107,272

4 HF Deluxe 94,376 Passion 80,261

5 CB Shine 62,176 CB Shine 76,562

6 Dream 57,281 Glamour 63,009

7 TVS XL Super 54,531 TVS XL Super 53,849

8 Pulsar 52,541 Maestro 48,002

9 Maestro 44,819 Pulsar 46,314

10 Glamour 40,886 Jupiter 42,838 Source: Siam


Page 12

Auto Expo 2016 - Lacked showstoppers

We attended the Auto Expo 2016 where ~108 car and bike models—from carmakers like Maruti Suzuki, Hyundai, Honda and Tata Motors as well as marquee brands like Audi, BMW, Mercedes-Benz and Jeep—and several recently-introduced automobiles were displayed. Overall, we found there were limited launches in the context of the Indian market. Some manufacturers exhibited models that will not be launched in India in the near future while some did not display relevant models at the Expo, that are expected to be launched within a year in the Indian market. A number of big brands (Ferrari, Maserati, Royal Enfield, Bajaj Auto and Harley Davidson) decided not to participate in the show. Although consumer interest in particular models is an unreliable indicator of the future demand, we remain upbeat about Maruti, given that there were no major launches in the hatch/sedan segment. While M&M’s recent two launches-TUV1OO & KUV3OO are doing reasonably well, there was no showcase of its UV that will be launched in FY17. In the 2-W space, Honda’s Navi did garner some attention. Overall, the EXPO was an unexciting affair.

SUVs clearly the flavour of the season!

Despite the glare on fuel guzzling SUVs in India from an environmental standpoint, the Expo was skewed towards big cars. SUVs remain one of the faster growing segments (18% CAGR in FY10-15) in an otherwise tepid passenger car market. Among the 25 SUVs revealed at the Expo, key products were Maruti’s Vitara Brezza (compact SUV), Maruti’s Ignis (micro SUV), Tata’s Nexon (compact SUV), Tata’s Hexa (UV2) & Honda’s BRV (compact SUV). Hyundai also displayed its concept Carlino (compact SUV) & Tucson (positioned between Creta & Santa Fe). Other players like Nissan, VW, Datsun & Toyota exhibited their UVs. M&M’s concept XUV Aero (essentially coupe version of XUV) looked exciting. However, as per management, it will take two to three years to convert this concept into reality. Overall, the UV segment will witness maximum launches in FY17. Few launches in hatchback/sedan segment - Positive for Maruti This year there were only a handful of models unveiled in the hatchback/sedan segment. VW unveiled its compact sedan Ameo, which bore an underwhelming look & will not be a serious threat to Maruti’s DZire. VW group also launched Polo GTI at an asking price of | 20 lakh. Other offerings in this segment were Chevrolet Beat Essentia & Tata Motor’s Kite. We believe that these upcoming models do not pose any threat to Maruti, which is currently facing a capacity constraint.

Two-wheelers - some interesting models emerge

One of the biggest unveilings in the 2-W segment at the Expo was Honda’s Navi- a motorcycle with maxi-scooter tyres. We believe it is competitively priced at ~| 39,000 and will appeal to a lot of first time motorcycle buyers. TVS Motors showcased its recently launched Apache RTR 200 4V & Jupiter. It also displayed its 310 cc Akula, jointly developed with Akula. Another player to watch out for in the days to come will be UM Global, a new entrant in the Indian premium motorcycle market. The company has launched two models-Renegade Sport & Renegade Commando- in the Indian market. Although a new brand, it will look to challenge the numero uno Royal Enfield in the premium cruiser segment.

Remain upbeat on sector!!!

We remain upbeat on the auto space and expect a strong improvement, going forward. We believe the impact of the Seventh Pay Commission would spur incremental volume growth of ~16% over the next two years. The government’s increasing focus on emission norms (implementation of BS VI by 2020), new product launches and increase in content per vehicle will benefit ancillary companies.


Page 13

Exhibit 21: Maruti Suzuki – Vitara Brezza

Exhibit 22: Tata Motors - Nexon

Exhibit 23: Honda – BR V

Exhibit 24: Mahindra & Mahindra (M&M) – Aero

Exhibit 25: Tata Motor’s - Kite

Exhibit 26: Honda Motorcycle’s - Navi


Page 14

ICICIdirect.com Research Universe (Auto & Auto ancillary) CMP M Cap(|) TP(|) Rating (| Cr) FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E

Amara Raja (AMARAJ) 864 925 Hold 14761 24.1 30.2 35.0 35.9 24.7 20.5 20.8 16.9 14.4 34.3 32.9 31.3 25.6 24.4 23.2Apollo Tyre (APOTYR) 156 185 Buy 7849 23.0 21.6 23.3 6.8 7.2 6.7 4.1 4.4 4.0 22.6 18.0 17.5 19.8 16.0 15.1Ashok Leyland (ASHLEY) 87 93 Hold 24436 1.2 3.4 4.7 73.5 25.1 18.5 26.4 12.8 10.3 7.2 18.2 21.9 6.5 17.0 19.9Bajaj Auto (BAAUTO) 2285 2650 Buy 66115 97.2 123.9 141.1 23.5 18.4 16.2 16.6 14.1 12.5 35.6 36.6 35.9 26.3 30.1 30.7Balkrishna Ind. (BALIND) 566 625 Hold 5470 50.6 55.3 46.9 11.9 10.9 12.8 7.4 6.8 6.8 17.8 17.1 15.7 21.3 17.1 15.7Bharat Forge (BHAFOR) 742 920 Buy 17285 32.8 31.0 38.3 22.6 24.0 19.4 14.8 15.9 13.0 18.6 17.1 21.6 22.2 19.8 21.3Bosch (MICO) 16450 20000 Buy 51653 426.0 388.6 500.8 38.3 42.0 32.6 24.8 26.6 22.0 18.2 14.8 16.7 19.4 17.2 18.3Eicher Motors (EICMOT) 18961 20570 Hold 51214 227.1 479.5 567.8 83.5 39.5 33.4 44.2 20.3 18.1 24.5 41.7 38.3 24.5 37.9 34.3Exide Industries (EXIIND) 128 150 Buy 10859 6.4 6.9 8.0 19.9 18.4 15.9 11.5 10.1 9.0 18.9 19.3 19.9 13.5 13.4 14.1Hero Mototcorp (HERHON) 2573 2710 Hold 51383 119.5 159.8 167.1 21.5 16.1 15.4 10.6 10.1 9.2 45.9 49.2 43.1 36.5 39.7 35.5JK Tyre & Ind (JKIND) 76 115 Buy 1732 14.5 21.1 22.7 5.3 3.6 3.4 4.9 3.8 3.6 18.7 22.5 21.6 23.3 26.1 22.4M&M (MAHMAH) 1239 1470 Buy 73144 50.7 57.0 71.9 24.4 21.7 17.2 16.9 11.4 9.0 14.5 15.6 18.4 17.1 15.5 17.1Mahindra CIE (MAHAUT) 171 225 Buy 5514 2.7 11.1 13.5 63.2 15.4 12.6 16.9 10.5 8.0 7.5 13.6 14.9 7.4 11.0 12.6Maruti Suzuki (MARUTI) 3399 4940 Buy 102722 122.9 168.9 222.3 27.7 20.1 15.3 18.3 12.8 10.4 17.2 23.0 23.7 15.6 18.4 20.4Motherson (MOTSUM) 212 250 Hold 28094 6.5 9.4 13.1 32.6 22.6 16.2 10.4 9.3 7.8 24.7 26.0 29.8 25.9 31.5 38.7Tata Motors (TELCO) 301 430 Buy 93799 41.2 34.5 47.3 7.5 9.0 6.6 3.1 3.0 2.6 22.8 14.1 15.3 24.9 12.0 14.1Wabco India (WABTVS) 5330 6250 Hold 10127 63.6 106.3 146.2 83.8 50.2 36.4 52.1 35.4 26.2 14.0 19.2 21.2 18.2 23.1 25.3

Sector / CompanyRoE (%)EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)

Source: ICICIdirect.com Research


Page 15

Exhibit 27: Auto raw material index

RM Auto Index

149

80

100

120

140

160

180

200

220

240

Mar

-09

Jun-

09Se

p-09

Dec-

09M

ar-1

0Ju

n-10

Sep-

10De

c-10

Mar

-11

Jun-

11Se

p-11

Dec-

11M

ar-1

2Ju

n-12

Sep-

12De

c-12

Mar

-13

Jun-

13Se

p-13

Dec-

13M

ar-1

4Ju

n-14

Sep-

14De

c-14

Mar

-15

Jun-

15Se

p-15

Dec-

15

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

Exhibit 28: Currency movements

60

80

100

120

140

160

180

Dec-

11

Apr-1

2

Aug-

12

Dec-

12

Apr-1

3

Aug-

13

Dec-

13

Apr-1

4

Aug-

14

Dec-

14

Apr-1

5

Aug-

15

Dec-

15

US$INR US$JPY US$EUR

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


The in-house raw material index reflects the combination of

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

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

The chart shows a declining trend in raw material prices,

which is a positive for the industry


Page 16

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 [email protected]

ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai – 400 093

[email protected]


Page 17

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 view(s) in this report.

Terms & conditions and other disclosures: ICICI Securities Limited is a Sebi registered Research Analyst having registration no. INH000000990. ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com. ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. 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Documents

Sector View Decent start to new year…content.icicidirect.com/mailimages/IDirect_Motogaze_Feb16.pdf>15 year old CV); higher incentives for electric vehicles and higher agriculture