T
WO-WHEELER AUTO SALES VOLUME
Two-wheeler sales for January saw strong sales volumes reported
by the industry. While Hero Honda benefited from its new launches
in the third quarter, Bajaj Auto also benefited from the market
demand during the period. We expect the strong volume growth to
continue in the fourth quarter, which has traditionally been one of
the better quarters for auto companies.
Bajaj Auto:
Bajaj recorded a growth of 12% in motorcycles on the back of strong demand for the Discover and Pulsar models. With increasingly stronger sales of the Bajaj Discover and Bajaj Pulsar DTS-i products, only 45% of Bajaj motorcycle sales now come from the commoditized 100 cc segment. The company is all set to introduce an all-new motorcycle platform in Q2FY08 with the dual objective of improving its market share and get higher margins. Towards this end, Bajaj has now finalized product design and specification, and has scheduled pre-mass production trials in Q1FY08. Three-wheeler sales continue to be buoyant with a growth of 45% YoY. On the export front, Bajaj Auto clocked 119% rise in volumes (lower base) with sales of 39,812 units. The capacity is also being expanded to 300,000 units per month from April 2007 as the management expects growth of 25% in the next financial year. The Bajaj Kristal DTS-i, the first product from an all-new hi-tech scooter platform, is likely to be launched in the current month.
Hero Honda
: Hero Honda has reported sales of 297,554 units during January 2007. We believe sales have been boosted by the launch of new variants in the third quarter. The management expects the double-digit volume growth to sustain in the quarter given the new launches and promotions. However, higher variants of bikes in the entry variant will only add to the company's margin woes. Besides, the company is also an official partner in the ICC world cup that should lead to higher marketing expenses.
Volume trends - Two Wheelers
Jan '07 Jan '06 yoy (%) Apr-Jan'07 Apr-Jan'06 yoy(%)
Bajaj Auto
Motorcycles 195,560 173,835 12 2,039,214 1,553,041 31
Total 2 Wheelers 197,553 181,758 9 2,056,194 1,660,280 24
3 Wheelers 32,030 22,019 45 269,228 201,387 34
Total 229,583 203,777 13 2,325,422 1,861,667 25
Exports (out of above) 39,812 18,168 119 365,540 194,933 88
Hero Honda
Total 297,554 249,450 19 2,778,326 2,477,744 12
TVS Motors
Motorcycles 69,634 69,279 1 781,729 656,368 19
Total 2 Wheelers 121,147 112,910 7 1,279,786 1,104,424 16
Source: Company
Monthly sales growth yoy (%) - 2006
Source: Bloomberg
-20
-10
0
10
20
30
40
January
February
March
April
May
June
July
August
September
October
November
December
HHML Bajaj
February 5, 2007
Kotak Securities - Private Client Research Daily Morning Brief
Please see the disclaimer on the last page For Private Circulation 3
TVS Motors:
Motorcycle sales for TVS Motors increased only 1% for the month clocking volumes of 69,634 units as compared with 69,279 units in January 2006. TVS Scooty recorded 20,534 units in January 2007 compared to 17,957 units in the same period last year recording a growth of 14%. On the export front, TVS Motor Co continued its good performance having exported 7,049 units in January 2007 (growth of 11%).
Valuation FY08
CMP Sales Net profit EPS P/E Target Reco
(Rs) (Rs bn) (Rs bn) (Rs) (x) (Rs)
Bajaj Auto 2778 117 14.6 145 19 3234 BUY
Hero Honda 716 112 10 50.5 14 706 HOLD
TVS Motors 75 44 1.4 6.2 12 81 HOLD
Source: Company & Kotak Securities - Private Client Research
