Auto

14 Dec

Price hikes will vary from model to model – Maruti Suzuki

Update on the Indian Equity market:
On Friday, Nifty50 ended the week with gains at 13,514 (+0.3%). Among the sectoral indices, METAL (+1.1%), PSU BANK (+1.0%), and FMCG (+0.9%) ended with gains, while PHARMA (0.6%), IT (-0.4%), and AUTO (-0.1%) were the only losers. ONGC (+5.5%), NTPC (+5.2%), and GAIL (+5.0%) were the top gaining stocks while AXISBANK (-2.3%), DIVISLAB (-2.2%), and ADANIPORTS (-1.3%) were the top losing stocks.

Excerpts of an interview of Mr. Shashank Srivastava, ED- Marketing & Sales, Maruti Suzuki India Ltd (MARUTI) with CNBC TV18 on 10th December 2020:
• MARUTI has announced a hike in the prices of its vehicles from January 21 to offset the impact of rising input costs. The quantum of price hikes is still being discussed and will vary from model to model.
• Largely the input cost increases have been because of steel and precious metals (Palladium) increasing.
• Due to the shift from BS-IV to BS-VI, the consumption of precious metals used has increased, worldwide. As a result, the demand for these metals has gone up worldwide.
• Due to the mismatch in higher input costs and lower production in CY20, there has been a sharp increase in input costs and it has become imperative to hike prices.
• He believes the pent-up demand still exists. The long-term demand would depend on the fundamentals of the economy and Covid sentiment.
• This year has been a little unusual and the auto industry was recovering from supply chain disruptions. When the demand finally came in, inventory levels are lower and due to this demand-supply gap, he expects lesser discounts compared to last year.
• According to FADA registration numbers, MARUTI sold 143,554 vehicles in November which was lower than the numbers company expected. This is due to the difference in the number of RTOs from which data is collected by VAHAN (which FADA uses) vs the number MARUTI uses. VAHAN takes data from 1252 RTOs whereas there are 1465 RTOs in India. About 15% RTOs are not a part of VAHAN data and these are in the states of Telangana, Madhya Pradesh, and Andhra Pradesh. These 3 states comprise about 13-15% of MARUTI’s sales.
• Another problem with using the VAHAN numbers is that it used permanent registration. There are about 18 states which give temporary registration and the permanent registration comes in as late as 30 days.
• For loans to customers, MARUTI is planning to add 4 more banks and 5 more in 4QFY21E. There will be 17 banks integrated on the website, which disburse about 95% of auto loans.

Consensus Estimate: (Source: market screener website)
• The closing price of MARUTI was ₹ 7,715/- as of 11-December-2020. It traded at 51x/ 31x/ 25x the consensus earnings estimate of ₹ 150/ 247/ 308 per share for FY21E/FY22E/FY23E respectively.
• The consensus target price of ₹ 6,367 implies a PE multiple of 21x on FY23E EPS of ₹ 308/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Auto, Maruti Suzuki 0 Comments Read more...
09 Dec

JLR will not compromise on product and technology investments – Tata Motors

Update on the Indian Equity Market:

On Tuesday, Nifty closed 0.3% higher at 13,393. Within NIFTY50, ULTRACEMCO (+3.1%), TCS (+2.1%), and RELIANCE (+1.8%) were the top gainers, while HINDALCO (-2.3%), SUNPHARMA (-2.2%), and COALINDIA (-1.8%) were the top losing stocks. Among the sectoral indices, PSU BANK (+7.1%), REALTY (+0.8%) and IT (+0.8%) were the top gainers while METAL (-1.2%), PHARMA (-1.2%), and MEDIA (-0.9%) were the top losing sectors.

Excerpts of an interview with Mr. PB Balaji, Group CFO, Tata Motors, aired on CNBC-TV18 on 7th December 2020
● Management has consciously called out that turning free cash flow positive is a key objective of the business.
● Both JLR and TML will be free cash flow positive in 2HFY21E. The India PV business will turn positive from FY23E. The management is confident of delivering on these targets.
● JLR turnover was well underway before the Covid-19 disruption. Due to Covid-19, JLR has accelerated plans that were already in place.
● Turnaround of JLR depends on 3 verticals: 1) Focus on how to use the products that have been launched to their maximum limit, 2) China geography turnaround, and 3) Cost and cash savings as part of the Charge+ program. As these 3 factors come together, JLR will turn free cash positive and that will ensure deleverage.
● Land Rover has been doing better than Jaguar. Land Rover also generates most of the profits currently. Turnaround and sustainability of cash flows of Jaguar is part of the overall medium-long term JLR turnaround plan.
● On the Indian PV side, the New forever range launched by TML in February 2020 has been successful in generating demand traction. Overall, the industry is seeing a demand resurgence in PV led to a need for a safe commute. Post-Diwali this year there hasn’t been a serious decline in sales which is what happens normally. Order books are at all-time highs.
● The Indian CV business is also seeing sequential recovery, although slower than PV. Recovery came earlier in SCVs and ILCVs.
● MHCVs are also doing better in the last 1.5 months. Financing has opened up for MHCVs which is helping sales. With the economy slowly starting, there is a pick-up in cargo movements.
● One segment that is not performing well at all is the Passenger carriers (buses) segment due to schools being shut and most offices working from home.
● JLR has slashed FY21E capex plans to GBP 2.5 bn. But JLR will not compromise on product and technology investments. The capex cut is in tune reflecting the decline in the demand scenario. Some products whose business case was not strong enough have been put on pause.
● Every JLR product will have an electrification option by early FY22E. The electrification journey is well underway and is not stopping here.
● Additionally, Tata Motors is looking for partnerships – be in JLR or TML – to ensure capital productivity.
● JLR margins went up to 11.1% in 2QFY21 on the back of Charge+ cash savings. Management expects further improvement in profitability and cash flows in 2HFY21E. As volumes increase, initiatives made on the costs, especially material costs, will get reflected more.

Consensus Estimate (Source: market screener website)
● The closing price of TATAMOTORS was ₹ 182 as of 8-December-2020. It traded at 18 x/ 9x the consensus EPS estimate of ₹ 10.4/19.9 for FY22E/ FY23E respectively.
● The consensus target price of ₹ 148/- implies a PE multiple of 8x on FY23E EPS of ₹19.9/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Auto, Tata Motors , 0 Comments Read more...
07 Dec

Truck demand coming back; not enough buyers for buses – Ashok Leyland

Update on Indian equity market:
Markets continued the upward journey to end the truncated week as Nifty closed the day 140 points higher at 13,274. Within the index, ADANIPORTS (4.6%), HINDALCO (4.4%), and ICICIBANK (4.4%) led the index higher while RELIANCE (-0.8%), BAJAJFINSV (-0.6%), and HDFCLIFE (-0.6%) were three out of 11 losers. All the sectoral indices ended in the green with BANK (2.4%), PVT BANK (2.3%), and PSU BANK (1.5%) leading the pack.
Excerpts of an interview with Mr Anuj Kathuria, Chief Operating Officer, Ashok Leyland (AshokLey) published on CNBC-TV18 dated 3rd December 2020:
The monthly sales data for the month of November reported the seventh straight monthly improvement in sales, though the demand for buses was tepid.
He said that initial signs of demand coming back in the long-haul segment. The truck demand is coming back due to the movement of cement and steel whereas travel restrictions in the country have led to muted demand for buses.
The industry is witnessing growth in intermediate commercial vehicles. The tippers segment is holding strong and the company is expecting further improvement in MHCV (Medium & Heavy Commercial Vehicles) segment in December as well.
He said that the industry may see some replacement demand as the ownership cost of BS-VI (Bharat Stage-VI) is comparably lower. He also highlighted that state transport undertaking activity has intensified and the company is seeing more orders coming through.
The company is expected to show QoQ improvement in margins, but higher commodity prices could limit the gains.
Consensus Estimate: (Source: market screener website)
The closing price of AshokLey was ₹ 95/- as of 04-Dec-2020. It traded at 36x/ 20x the consensus EPS estimate of ₹ 2.6/ 4.8 for FY22E/ FY23E respectively.
The consensus target price of ₹ 90/- implies a P/E multiple of 19x on FY23E EPS of ₹ 4.8.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Ashok Leyland, Auto , , 0 Comments Read more...
03 Dec

Royal Enfield is many steps ahead of the competition – Eicher Motors

Update on the Indian Equity Market:
On Wednesday, NIFTY closed at 13,114 (-0.04%). Top gainers in NIFTY50 were GAIL (+4.9%), ONGC (+3.8%), and ASIAN PAINTS (+3.7%). The top losers were KOTAK BANK (-3.3%), HDFC Bank (-1.9%), and HDFC (-1.4%). The top sectoral gainers were REALTY (+2.9%), METAL (+2.6%), and AUTO (+1.2%) and the sectoral losers were BANK (-1.2%), PVT BANK (-1.2%), and FIN SERVICES (-1.1%).

Excerpts of an interview with Mr. Siddharth Lal, MD – Eicher Motors with ET Now dated 1st December 2020:
• With a 90-95% market share in the 250cc-plus motorcycle segment, Eicher Motors-owned Royal Enfield is readying itself with a mid-term plan called RE 2.0, which is focused on expanding product portfolio, geographical reach, and non-motorcycle revenue.
• Despite its vast cash reserves, the company is not eagerly looking at acquisitions, including the likes of the Italian brand Ducati.
• It has taken them time to get production up. There is a demand for more bikes from the dealers, and international customers.
• Currently, they have a bare minimum inventory everywhere. So, retail has been very strong, the inventories are depleted entirely, and production has caught up. The supply and timing was an issue for them. But even the supply is back in order.
• In the long term, they always have had a bullish view on the mid-size segment just because people want to upgrade and there’s a premiumization trend.
• They have all the technology and have built the capability. Their commercial abilities in terms of sales, marketing, distribution, and service are very strong.
• People should not discover Royal Enfield because they put an ad listing the price of their motorcycles. They should discover them because they’ve got rides and events, they’ve seen a friend or a colleague ride a Royal Enfield, or someone’s talked about it.
• They want to be able to reach each customer differently and everything has to be premium. It’s much curated, it’s very thought through, it’s very nicely done. So, once customers get that premium experience, they don’t want to go back into a shabby experience.
• They will do an acquisition where they think they can only incrementally improve it.
• They have so much opportunity in Royal Enfield itself, so they’d just conserve energy for that. If an opportunity to do something like they have been doing with Royal Enfield over the last 10 years, then it’s something worth putting in their time and effort.
• They have a very strong filter about how they would like to monetize their brand. It has to serve its huge audience of customers and give them a better motorcycling experience.
• They’re not positioned as a cheap brand anywhere in the world. They don’t sell on price. They are an alternative brand. They offer an alternative world view to their customers. Certainly, it’s good value, it’s at a good price.
• The way they’re working on EVs is that they are not going to be the first to the market. But rather they’d study the market, understand the technology – there’s a full team at Royal Enfield who does EVs now.
• They’re constantly studying the market, riding bikes, making their mule bikes, prototype bikes, and riding them themselves, seeing what happens, seeing what they like, don’t like.

Consensus Estimate: (Source: market screener and investing.com websites)
• The closing price of EICHERMOTORS was ₹ 2,531/- as of 2nd December 2020. It traded at 48x/ 31x/ 25x the consensus earnings estimate of ₹ 52.3/ 80.4/ 101 for FY21E/FY22E/23E respectively.
• The consensus price target of EICHERMOTORS Ltd is ₹ 2,301/- which trades at 23x the earnings estimate for FY23E of ₹ 101/-
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Auto, Eicher Motors, Rallis 0 Comments Read more...
17 Nov

Not keen on diversifying at this point – M&M

Update on the Indian Equity market:
On Friday, Nifty50 ended 0.2% higher at 12,720. EICHERMOT (+7.4%), BAJAJFINSV (+3.7%), and COALINDIA (+3.1%) led the index gainers while TATAMOTORS (-3.3%), LT (-2.0%), and HDFC (-1.1%) led the laggards. Among the sectoral gainers, METAL (+1.7%), REALTY (+1.3%), and PHARMA (+1.1%) were the leaders while MEDIA (-0.9%), and FMCG (-0.1%) were the only index losers.

Excerpts of an interview of Mr. Anish Shah, MD & CEO-designate, M&M published in Business Standard on 12th November 2020:
• The stock price has more than doubled since March. The board’s decision to not invest in SsangYong was important and signaled to investors that the management is serious about capital allocation.
• The next re-rating will happen once the international subsidiaries turn around and start contributing to earnings. The second set of actions is toward driving the growth of the domestic business. Third, they have identified significant growth drivers for the future, which are termed ’10 gems’.
• They are conducting a detailed analysis of growth drivers of international subsidiaries’ performance; does it have the potential for an 18 percent return on equity? They are working to see if they can revisit their go-to-market, product, and channel strategies. The subsidiaries will have to show a profitable path.
• M&M was the best performing stock in the Nifty for 17 years. Though acquisitions were made even then, that was driven by a very high level of fiscal discipline. Now, the acquisitions will be made, just that the bar in terms of fiscal discipline will be as high as it was in the past.
• They don’t expect to diversify even when they make an acquisition. There are 10 businesses right now and they believe there is a lot of potential to grow. They are keen on scaling up the diversified footprint.
• The joint venture with Ford has been delayed because of the pandemic and government approvals.
• There is a lot of synergy from material costs in the auto and farm equipment segments. They announced the best-operating margins and that is why those segments will be together.

Consensus Estimate: (Source: market screener website)
• The closing price of M&M was ₹ 629/- as of 13-November-2020. It traded at 23x/ 17x/ 15x the consensus earnings estimate of ₹ 26.9/ 36.7/ 41.1 per share for FY21E/FY22E/FY23E respectively.
• The consensus target price of ₹ 667 implies a PE multiple of 16x on FY23E EPS of ₹ 41.1/-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Auto, Mahindra & Mahindra , 0 Comments Read more...
30 Oct

Expect impact of high rubber prices in 4QFY21 – Ceat

Update on the Indian Equity Market:
The Indian markets witnessed a volatile monthly expiry day as Nifty opened the day higher but managed to close 57 points lower at 11,673. Within the index, the gainers were led by ASIANPAINT (3.1%), TECHM (2.2%), and ULTRACEMCO (2.0%) whereas LT (-4.9%), TITAN (-3.4%), and ONGC (-2.9%) were the laggards. Among the sectoral indices, only IT (0.5%) closed the day in green while MEDIA (-1.7%), AUTO (-1.1%), and PHARMA (-0.9%) led the laggards.
Excerpts of an interview with Mr. Anant Goenka, Managing Director, Ceat Ltd (Ceat) published on CNBC-TV18 dated 28th October 2020:
The company is witnessing a very large demand in the months of October and November from the Original Equipment Manufacturers (OEM). The demand seems challenging from 4QFY21E onwards.
Raw material prices are inching up for the past few days. The increased rubber prices will start coming into effect around 4Q onwards. This will have a negative impact on margins.
He said that the rural economy has done well for the company. The farm sector has shown 50-60 percent growth in the replacement segment. The revenues are also back to 90 percent of pre-COVID levels. The higher demand is a mix of pent-up demand and a lot of other aspects.
The higher profitability margins during 1HFY21 were led by favorable mix and t is expected to come down in 2nd half of FY21E.
The company has completed a capex of Rs 2,500-3000mn YTD (Year-to-Date) and the figure will be around Rs 5,000mn by the end of FY21E and Rs 6,000 mn for FY22E.
Ban on Chinese tyres has impacted the PCR replacement demand. However, he said that OEMs are allowed to import Chinese tyres.
Consensus Estimate: (Source: market screener website)
The closing price of Ceat was ₹ 1,123/- as of 29-Oct-2020. It traded at 22x/ 16x/ 14x the consensus EPS estimate of ₹ 51/ 72/ 78 for FY21E/ FY22E/ FY23E respectively.
The consensus target price of ₹ 1,014/- implies a P/E multiple of 13x on FY23E EPS of ₹ 78/-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Auto Ancillary, CEAT , 0 Comments Read more...
26 Oct

Difficult to predict festive season sales – Bajaj Auto

Update on the Indian Equity Market:
On Friday, Nifty ended 0.3% higher at 11,930 led by the auto stocks. The top gainers for Nifty 50 were Maruti (+4.3%), M&M (+3.3%), and Tata Steel (+3.3%) while the losing stocks for the day were Ultra Cement (-2.4%), HCL Tech (-1.6%), and HUL (-1.6%). Top gaining sectors were Auto (+2.9%), Media (+0.7%), and IT (+0.5%) while top losing sectors are Realty (-1.1%), Pharma (-0.4%) and Pvt Bank (-0.04%).

Edited excerpts of an interview with Mr Rakesh Sharma, ED, Bajaj Auto Ltd; dated 22nd October 2020 from CNBC TV18:

The geographical mix & the business unit mix have a very big impact on the blended margins of Bajaj Auto. Last year the Company faced many headwinds in maintaining the margins. The Company is optimistic about maintaining the margins reported in 2QFY21 despite raw material cost increases seen.
There has been a marginal improvement in walk-ins, enquiries & sales over the beginning of the festive period last year.

Bajaj Auto is optimistic about maintaining margin despite raw material cost increase and they have streamlined low margin products.

The Company recorded the highest ever sales of Pulsar in 2QFY21. This impacted margins in a positive way during the quarter.

The Company had the highest ever exports in September-20 and October performance will beat September performance according to Mr Sharma. If the Company does not have any supply chain issues and transport interruption, then in November they will beat October exports.

The Company saw a smart recovery in domestic performance. They aim to improve the domestic market share from 18.2% in H1 to 20% in H2. There is a huge scope for expansion in market share but the Company does not want to compromise the margins and profitability for gaining the market shares.

It is very difficult to make predictions about the festive season sales as of now. The industry is seeing a slight improvement in enquiry and sales in this festive season. Post festive where all pent up demand is exhausted, it is interesting to see how the industry and demand responds. This will be the most important thing to be considered.
125cc segment is more profitable than 100cc and thus Bajaj Auto has expanded this market segment.

The ultra-premium segment (KTM/ Dominar) has clocked 10,000-12,000 units run rate per month currently.

The underperforming models/ low margin products of the Company have been stream-lined and prices have been increased during 2QFY21.

Bajaj Auto has passed on cost increases from September-20 onwards in the majority of the International markets. It had been a very difficult exercise for the Company as the Chinese & Japanese brands which has seen a huge revival, the company had to face intense competition.
The Company hopes the three-wheelers will start performing well with support from the Government initiatives.

Consensus Estimate: (Source: market screener website)
The closing price of Bajaj Auto Ltd was ₹ 3,090/- as of 23-October-2020. It traded at 20.7x/ 17.2x/15.0x the consensus book value estimate of ₹ 149/180/206 for FY21E/ FY22E/ FY23E respectively.

The consensus target price of ₹ 3,088/- implies a PE multiple of 15.0x on FY23E EPS of ₹ 206/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Bajaj Auto , , , , , , 0 Comments Read more...
19 Oct

Auto component makers see MoM improvement in demand

Update on the Indian Equity Market:
On Friday, Nifty ended 0.7% higher at 11,762. The top gainers for Nifty 50 were JSW Steel (+6.7%), Tata Steel (+5.4%), and BPCL (+4.4%) while the losing stocks for the day UPL (-7.7%), HCL Tech (-3.5%), and M&M (-1.8%). Top gaining sectors were Metal (+4.0%), Realty (+2.6%) and Pvt Bank (+2.1%) while losing sectors were IT (-0.1%) and Media (-0.4%).

Edited excerpts of an interview with Mr Sunil Bohra, ED & Group CFO, Minda Industries, and Mr Jayant Davar, Co-Chairman and Managing Director, Sandhar Technologies; dated 15th October 2020 from Economic Times:

According to Mr Bohra, the auto component industry has been witnessing a month-on-month improvement in demand, and going forward, the sustenance of the demand hinges on how the scenario plays out during and after the festive season.

Mr Bohra added that October 2020 auto volumes are expected to be better than September 2020. OEMs are positive on medium-term demand forecasts. Personal mobility is driving the auto demand in the last few months.
Mr Bohra said that it is difficult to predict how demand would play out over the next two to three quarters.

Mr Davar, on the other hand, gave an optimistic commentary, stating that he is confident of a sustained recovery in demand. According to him, the demand will stay for a longer time. There is a sense of apprehension but all the indicators point towards a sustained recovery.

According to Mr Davar, October 2020 could potentially be a historic month of the industry. Although at the same time, he did admit that it will take some time for Covid-led damage during 1Q to be wiped out. FY22E will see an improvement in margins for the industry considering the market sustains and the demand sees a rise.

Mr Bohra commented that the cash position of the auto ancillary players is stable. There is no cash crunch witnessed. Minda Industries is in a very comfortable position in terms of the balance sheet.

Mr Bohra and Mr Davar offered slightly differing stances on how the demand trajectory could shape up in the future, both seemed to share a similar view on the localisation of components. The companies have been focusing on and investing in localisation of products for 3 decades. Companies are working on reducing the dependence on China for different parts/ materials. The Companies are trying to diversify their supply chain geographically and be prepared for the worst going ahead.

When asked about the government’s push on AtmaNirbhar Bharat and sourcing locally, the management of Minda, as well as Sandhar, welcomed the step, lauding the coming together of OEMs, suppliers and policymakers for the first time.
Mr Bohra also reiterated that the component maker has been consistently working towards increasing localisation and they are on a constant lookout for alternate (local) sourcing strategies, with strong support from the OEM clients as an added boost.

Mr Davar also brought to light the limitations of the industry in terms of the economies of scale and the fact that substitution of import would require the entire system to pay more.

Consensus Estimate: (Source: market screener website)
The closing price of Minda Industries Ltd was ₹ 327/- as of 16-October-2020. It traded at 97.6x/ 29.7x/20.2x the consensus EPS estimate of ₹ 3.4/11.0/16.2 for FY21E/ FY22E/ FY23E respectively. The consensus target price of ₹ 361/- implies a PE multiple of 22.3x on FY23E EPS of ₹ 16.2/-.

The closing price of Sandhar Technologies Ltd was ₹ 240/- as of 16-October-2020. It traded at 47.1x/22.4x/16.1x the consensus EPS estimate of ₹ 5.1/10.7/14.9 for FY21E/ FY22E/ FY23E respectively. The consensus target price of ₹ 279.5/- implies a PE multiple of 18.7x on FY23E EPS of ₹ 14.9/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Minda Industries , , , 0 Comments Read more...
15 Oct

Replacement Market has played well- CEAT

Update on the Indian Equity Market:
On Wednesday Nifty closed 0.3% higher at 11,917. Among the sectoral indices, Fin Services (+2.0%), Bank (+1.6%), and Private Bank (+1.5%) closed higher. IT (-1.3%), Pharma (-0.7%), and Auto (-0.3%) closed lower. Wipro (-7.1%), NTPC (-4.1%), and ONGC (-3.1%) closed on a negative note. Bajaj Finserv (+4.1%), SBILIFE (+3.4%), and Bajaj Finance (+2.8%) were among the top gainers.

Excerpts from an interview of Mr. Anant Goenka, MD & CEO, CEAT Ltd with ET NOW dated 12th October 2020:

● The demand for tyres has picked up faster than expectations.
● They operate in 3 markets- Replacement, Auto players, and Export.
● The replacement market has played very well and it leads the way, OEM’s has recently seen a pick up from August and September and reached pre-covid levels. The Export segment has also seen gradual growth.
● Amongst vehicle categories, the two-wheeler and tractor industry is showing the strongest demand followed by the passenger car segment.
● The Commercial Vehicle OEM segment has yet to show growth. The demand is slow over there.
● The rural sector has also shown a very strong demand for the company.
● The company is very well positioned at this point in time and had set up a fair amount of capacity.
● The company’s capacity is well utilized.
● The company had set a new facility in Nagpur for 2 Wheelers and the PV car facility in Chennai, and Truck facility in Halol is now ramping up. The company has invested around Rs 3,000 crore.
● The last six months were about managing supplies.
● Things are much clear for the company up to December, January onwards will have to see how things will pan out.
● The company is planning to reduce its cost by Rs 1000 mn.
● Speaking on the manufacturing front, he said India is in a strong position in the Auto Space. Within Type space, the industry is capable of manufacturing all kinds of tyres.
● On Export opportunities, he said the market has shown a linear growth. It is one big area where the Industry can take advantage of the current situation.
● The company is planning to de-risk the exposure towards China by focusing to have at least one domestic supplier for key raw materials.
Consensus Estimate: (Source: market screener and Investing.com websites)
● The closing price of CEAT was ₹ 1,004/- as of 14-October-2020. It traded at 22x/ 15x/ 13x the consensus Earnings per share estimate of ₹ 46.6/65.5/79.0 for FY21E/ FY22E/ FY23E respectively.
● The consensus average target price for CEAT is ₹ 967/- which implies a PE multiple of 12x on FY23E EPS of ₹79.0/-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Auto Ancillary, CEAT , 0 Comments Read more...
30 Sep

Premium brands witnessing a growth of 50% – Bajaj Auto

Update on the Indian Equity Market:
On Tuesday, NIFTY closed in minor red at 11,222 (-0.05%). Top gainers in NIFTY50 were Hindalco (+5.3%), ULTRACEMCO (+3.3%) and HERO MOTOCORP (+2.8%). The top losers were UPL (-3.5%), ONGC (-3.5%), and INDUSIND (-3.4%). Top sectoral gainers were METAL (+1.9%), AUTO (+0.3%), and IT (+0.2%) and sectoral losers were PSU BANKS (-2.2%), FMCG (-1.5%), and PVT BANK (-1.3%).

Excerpts of an interview with Mr. Rajiv Bajaj, Managing Director – Bajaj Auto with CNBC -TV18 dated 28th September 2020:
● Bajaj Auto has partnered with KTM, Husqvarna and Triumph. So Bajaj Auto cannot engage with Harley due to these partnerships.
● Harley Davidson has decided to end India operations on account of low sales and a global rewire strategy. The company which sold over 58,000 units in North America in the first six months of this year has sold just over 25,000 units in India in a ten year period.
● Bajaj agreed that Harley could never really take off in India due to the high price point but said that Bajaj Auto’s partnership’s with KTM and Husqvarna show how brands like Harley can succeed in India.
● Bajaj Auto tied up with KTM in 2007 when the latter was selling 65,000 motorcycles a year and struggling and today KTM has surpassed Harley with a sale of three hundred thousand units a year.
● This year they should make close to two hundred thousand KTM’s & Husqvarna’s for global sales including India. These bikes between 125-400 cc are very competitively priced and KTM has distribution all over ASEAN and Latin America which KTM could not do before. This should be the goal of brands like Harley Davidson also.
● Distribution is about demand fulfilment and will not generate demand. If Harley is looking at making a 300-400cc motorcycle then they must get it absolutely right. The Street 750 did not succeed as it was considered a poor man’s Harley.
● Q2 is in line with July projections. Projected 1 mn motorcycle & 3W sales if supply chain supports. They can reach 2.5 mn in October if production supports. 3W sales are moving up too.
● Pulsar sales are expected to be at an all-time high of 2 lakh units in October. Exports have seen an all-time high in September-October.
● Premium segments like KTM, Dominar have seen close to 50% growth. KTM exports in the US, EU & Australia see 30-100% growth.
● They see no obvious evidence of a shift to COVID linked personal mobility pick up.
● They have re-engineered CT and Platina portfolio for a profitable share gain.
● Lockdown has destroyed Tier 1 & 2 suppliers. Tier 1 suppliers facing labour issues.
● Bajaj Auto can see sales of 4 lakh units in the month of September.

Consensus Estimate: (Source: market screener and investing.com websites)
● The closing price of Bajaj Auto was ₹ 2,901/- as of 29th September 2020. It traded at 19x/ 16x/ 14x the consensus earnings estimate of ₹ 149/ 179/203 for FY21E/22E/23E respectively.
● The consensus price target is ₹ 3,010/- which trades at 15x the earnings estimate for FY23E of ₹ 203/-
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Auto, Bajaj Auto 0 Comments Read more...