Auto

03 Mar

No effect of coronavirus on supply production – Shashank Srivastava, Maruti Suzuki

Excerpts from an interview of Mr Shashank Srivastava, Executive Director – International Operations, Maruti Suzuki with CNBC-TV18 dated – 2nd March 2020:

Update on the Indian Equity Market:

NIFTY continued its losing streak on Monday, it closed at 11,133 (-0.6%). The top gainers in NIFTY50 were HCL Tech (+2.5%), Eicher Motor (+2.5%) and Nestle (+2.2%). Whereas Yes Bank (-6.7%), SBI (-5.1%) and Tata Steel (-4.7%) were the top losers. All the sectors ended losers except NIFTY IT (+1.4%). The top sectoral losers were Media (-4.6%), PSU (-4.5%) and Metal (-2.2%)

  • Speaking about the coronavirus impact on disrupting the supply chain, Mr. Srivastava says, there is no effect on the international operation as far as supply production is concerned.
  • On the domestic front, he says, as the first half (H1) figures were negative for the industry and also for Maruti Suzuki, somewhere in the range of like 16-17 per cent. The thirds quarter figures were positive for Maruti though the industry was negative.
  • February seems to be negative across the space, except for a couple of manufacturers like Ford and Renault.
  • Speaking about the BS-IV to BS-VI transition he says, the had some transition issue in February which would continue in March as well.
  • About the rural-urban split he says, Rural like last year was around 36 per cent of total sales. This year so far 38.5 -39 per cent is coming from rural areas. There has been an uptick in the second half.
  • The monsoon ending up with a positive 4% has led to the expectation of bumper rabi crop and therefore the sentiments in the rural areas are much better and that is reflected in the sales of the past few months.
  • Speaking about growth expectations, he says, the company is positive for the next year as rural demand sentimentally has been better. However, the consensus growth expectations seem to be in the range of 3-5 per cent for the industry.
  • The company has stopped BS-IV production altogether in January and now they are only producing BS-VI vehicles. The company started this transition almost a year ago.
  • The inventory of BS-IV stock is around 2500 units, which seems to be a half-day stock for the company.

Consensus Estimate: (Source: market screener website)

  • The closing price of Maruti Suzuki was ₹ 6,300/- as of 02-March-2020.  It traded at 31x/24.6x/ 20x the consensus earnings estimate of ₹ 202 / 256 / 314 for FY20E/ FY21E/ FY22E respectively.
  • The consensus target price for Maruti is ₹ 7,227/- which implies a PE multiple of 23x on FY22E EPS of ₹ 314/-.

 

By Auto, Maruti Suzuki, Uncategorized , 0 Comments Read more...
26 Feb

Ashok Leyland bets big on modular platform, says it will reduce the cost of ownership for customers

Update on the Indian Equity Market:

On Tuesday, NIFTY closed marginally lower at 11,813. The top sectoral gainers were Realty (+1.0%), IT (+0.8%) and Metal (+0.2%). The worst sectoral performers were Pharma (-2.2%), Auto (-0.7%) and Media (-0.6%). The top gaining stocks for Nifty50 were TCS (+2.3%), JSW Steel (+1.6%) and Tata Steel (1.5%) while the losers were Dr Reddy (-2.7%), Sun Pharma (-2.6%) and Hindalco (-2.6%).

Excerpts from an interview with Mr Anuj Kathuria, Chief Operating Officer (COO) – Ashok Leyland aired on CNBC18 TV on 22nd February 2020:

  • After unveiling tractor-trailer in 46-tonne category range, Hinduja Group flagship Ashok Leyland COO said modular platform range will reduce the cost of ownership for customers and the company is offering few vehicles to select customers.
  • Mr Kathuria said that the modular platform is going to have an entire range of vehicles starting from the 16-tonne right up to the 55-tonne. The platform allows the customers to configure the vehicles as per their applications and business requirements. It naturally would help them get a superior total cost of ownership and total cost of operations. It reduces the number of parts that are required to build vehicles. It inherently ensures better aftermarket support.
  • He added that the modular platform vehicles are BS-VI compliant. The technology used on BS-VI is mid-NOx technology that ensures the operating cost or the fuel efficiency or the fluid efficiency is best-in-class.
  • About the transition from BS-IV to BS-VI, he said that the offerings that Ashok Leyland can make to the customer are many more. They increase multi-fold but definitely there will be certain sweet spots in the configurations. However, if tomorrow a customer comes up with a new application and new requirement, it can be configured very quickly, most of the configurations are being homologated, so the time to market would be significantly different on this platform.
  • According to him, the Medium and Heavy Commercial Vehicle (M&HCV) growth is linked to the economic growth of the country.
  • The decline in demand for M&HCVs has been up to 45%. From his point of view, this decline is a combination of the cyclicality as well as certain structural changes that happened. Thus, the CV (Commercial Vehicle) industry will have to wait and watch the axle load norms that brought in excess capacity overnight of almost 20-25%. This would take some more time to be absorbed by the industry.

Consensus Estimate: (Source: market screener website)

The closing price of Ashok Leyland Ltd. was ₹ 81/- as of 25-February-2020.  It traded at 43x/27x/17x the consensus earnings estimate of ₹ 2.0/ 3.2/ 5.0 for FY20E/ FY21E/ FY22E respectively.

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10 Feb

Reducing non-core debt to pare debt: Tata Motors

Update on the Indian Equity Market:

After a week-long rally, investors booked profits which led to a fall of 52 points in Nifty to close at 12,087. This follows the weak Asian markets following the rising death toll from a virus spreading from China. Apart from result season, there was no major catalyst to move the markets on Friday. Within the sectoral indices, Media (1.7%), Pharma (0.6%) and IT (0.5%) closed the day higher while REALTY (-1.8%), AUTO (-1.0%) and PVT BANKS (-0.5%) were the highest losers. Among the index stocks, ZEEL (5.5%), NTPC (3.2%) and COALINDIA (2.8%) led the gainers whereas EICHERMOT (-3.1%), TATAMOTORS (-3.0%) and INDUSINDBK (-2.7%) brought the index lower.

Reducing non-core debt to pare debt: Tata Motors

Excerpts from an interview with Mr Guenter Butschek, MD & CEO – Tata Motors published in Livemint on 7th February 2020.

  • Mr Butschek said that the company has invested sufficiently in its product library that includes common vehicle architectures, powertrains, transmissions, and other shared technologies to reduce overall product development cost.
  • He is confident that in the coming two years, the company will see strong growth as far as modularity is concerned across commercial and passenger vehicles. He said that the company has done homework on its turnaround plans, investing in new technology platforms such as CESS (connected, electric, shared and safe mobility) and tapping into the Tata Group companies’ strengths to build an electric vehicle (EV) ecosystem.
  • Referring to the company’s efforts to strengthen its financials, he said Tata Motors has turned cash accretive despite the collapse of the medium and heavy commercial vehicle (MHCV) segment, which contributes 47% of total commercial vehicle revenue that accounts for 65% of total domestic revenue.
  • The product portfolio of company is much better than what it was when the economic slowdown began two years ago. He is confident that once the economy revives, the significantly upgraded products would do much better in terms of cost-based contribution to company’s margin base.
  • Butschek said that customers would take a while to absorb the higher cost of purchases under BS-VI emission norms, which would entail a product price increase of 10-15%.
  • The company had ₹ 233,365 mn worth of debt in its India business as of 30th September 2019. The consolidated debt including Jaguar Land Rover (JLR) stood at ₹954,650 mn. He said that the company is planning to reduce non-core assets to reduce the debt.
  • The company is focusing on reducing costs, including material costs and working to enhance productivity.
  • As part of its turnaround plan, Tata Motors plans to launch 12-14 passenger vehicles over the next three to five years, besides at least four new electric vehicles over the next 18-24 months.

Consensus Estimate: (Source: market screener website)

  • The closing price of Tata Motors was ₹5/- as of 07-February-2020. It traded at 109x/ 11x/ 7x the consensus earnings estimate of ₹1.6/ 15.4/ 24.7 for FY20E/ FY21E/ FY22E respectively.
  • Consensus target price of ₹ 201 /- implies a PE multiple of 8x on FY22E EPS of ₹ 24.7 /-
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06 Feb

‘Business to Lagos has not been impacted and there’s no reason to be circumspect’- Mr. Rakesh Sharma, executive director, Bajaj Auto

Update on the Indian Equity Market:

On Wednesday, NIFTY closed positive (+0.9%) at 12,090. NIFTY50 led by TATAMOTORS (+10.7%), YESBANK (+8.6%) and TATASTEEL (+5.8%). ZEEL (-6.4%), HEROMOTOCO (-3.6%) and DRREDDY (-3.1%) were the top NIFTY losers. METAL (+3.1%), REALTY (+2.2%) and FIN SERVICE (+1.4%) were the top gaining sectors. MEDIA (-0.8%) was the only sector that ended negatively.

Excerpts from an interview with Mr. Rakesh Sharma, Executive Director, Bajaj Auto published on Livemint on 5th February 2020:

  • There has been a ban on the movement of two-wheelers and three-wheelers on certain roads in Lagos city for quite some time. There has been a law that says two-wheelers and three-wheelers cannot ply within Lagos city on these roads.
  • What has happened now is that there has been a restatement of this law and thereafter more rigorous enforcement because of congestion which they are experiencing and that is what has triggered this spate of news.
  • There are some 400 roads and by lanes within the Lagos city which had been identified quite a few years ago, maybe a couple of years ago. So they are just enforcing those things that these vehicles are not permitted.
  • Nigeria is a large country and motorcycles in Lagos city is probably only 6-7% of their business. Similarly, three-wheelers is also about 10% of their business so it is really not a very significant event as of now.
  • One can run a motorcycle on a commercial basis in certain areas, but what happens is it becomes more inconvenient as suddenly if you have to go from point ‘A’ to point ‘B’ and in middle there is a road where it is not allowed, it becomes a problem.
  • Total two wheeler exports to Nigeria are less than 30% of their exports, in the magnitude of 25% or so.
  • As things stand now, they are not anticipating any major impact. In international business, this kind of things happens all the time.
  • Bangladesh did it last year when they did not permit the three-wheelers so these things sort of cancel each other. So it is not a significant event from their perspective- not for Nigeria and not for the international business.
  • It is difficult to imagine that this kind of thing suddenly becoming an epidemic across Nigeria. So according to him, they will wait and watch.
  • At this stage, it is not even a setback. It is temporary irritation and he said he would not classify this as a setback. They encounter these things all the time in emerging markets. It does not really make them sit up and sweat.

Consensus Estimate: (Source: market screener website)

  • The closing price of Bajaj Auto was ₹ 3,158/- as on 5-February-2020. It traded at 18x/ 17x/ 15x the consensus earnings estimate of ₹ 174 /183 /204 for FY20E/ FY21E/ FY22E respectively.
  • Consensus target price is ₹ 3,226/- which implies a PE multiple of 16x on FY22E EPS of ₹ 204/-
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13 Jan

Tata Motors shifts focus to cars on weak demand for CVs

Update on the Indian Equity Market:

On Friday, NIFTY closed at 12,257 (+0.3% higher than the previous close). Among the stocks, Coal India (+3.3%), Infosys (+1.7%) and Ultratech Cement (+1.6%) were the gainers. Yes Bank (-5.0%), Zee Entertainment (-3.5%), and Indusind Bank (-1.2%) were the top losing stocks. Nifty Realty (+1.8%), Nifty Metal (+1.2%) and Nifty Auto (+0.8%) were the top sectoral gainers while Nifty Pvt Bank (-0.1%) was the only sectoral loser.

Excerpts from an interview with Mr Guenter Butschek, MD & CEO, Tata Motors Ltd published in Livemint on 10th January 2020:

  • Tata Motors Ltd (TML) is betting big on passenger vehicles (PVs) to lead its turnaround plans as it transitions to Bharat Stage-VI emission norms. The move to BS-VI will give the company ‘a much more powerful play’ in the domestic market during the next fiscal.
  • With the new range of products, including upgrades for BS-VI, Mr Butschek is confident that March 2020 would be the turning point. If this gets support from the tailwinds, TML will get back to the previous growth path.
  • Referring to TML’s new product pipeline, including the company’s ambitious electric vehicle plans, Mr Butschek said the company plans to unveil 26 products at next month’s Delhi Auto Expo in February, including the 14 new commercial and 12 new passenger vehicles. This would be the biggest display of new vehicles. TML also plan global unveils of four new vehicles.
  • Mr Butschek termed the transition to BS-VI as ‘the single biggest engineering and investment effort ever’ put in by TML. He said a team of 3,500 engineers worked on BS-VI projects, upgrading over 20 engine platforms, 100 lead vehicle models and 1,000 variants. TML invested more than ₹ 1,200 crore in FY19 and hired 500 additional engineers for the process.
  • According to him, TML’s turnaround story in PVs and CVs is inspiring in terms of cost reduction. The Company has been able to reduce their breakeven point during tough times which is clear proof that they have done their homework. They are done with their investments and now they need is the volumes.
  • One key step was to bring down product development costs in its common vehicle architecture, which would form the base for several upcoming models.
  • In PVs, it has developed flexible vehicle platforms, code-named Alpha and Omega, which would power up to 12-14 new nameplates in the near- to mid-term. The new premium hatchback Altroz is going to be the first model from its Alpha architecture. The two modular platforms will also power the range of electric cars planned by the Company.
  • Mr Butschek said that TML would remain cautiously optimistic while estimating that the market would recover by 2HFY21, once the BS-VI transition is behind.
  • TML is seeing marginal improvement in retails. While the market sales volumes were flat YoY in December, TML’s sees improvement in its performance comparing the previous months.
  • For CVs, revenue from which was over four times the revenue of PVs, Mr Butschek said absorption of excess freight-carrying capacity could take up to five years, thereby hampering demand from the truck fleet owners across the country. Introduced in July-August 2018, the new axle load norms raised the permissible gross vehicle weight (GVW) of over 16-ton heavy trucks by about 12-25%, thereby creating excess carrying capacity for fleet operators.
  • A good vehicle scrappage policy could help reviving the demand for CVs in the near term, said Butschek.

Consensus Estimate: (Source: market screener website)

  • The closing price of Tata Motors was ₹ 196/- as on 10-January-20. It traded at 25x/ 12x/ 8x the consensus EPS of ₹ 7.5 / 15.6 / 22.9 for FY20E/ FY21E/ FY22E respectively.
  • Consensus target price is ₹ 187.5/- which implies a PE multiple of 8x on FY22E EPS of ₹ 23/-
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27 Dec

Focus on vertical strengthening of product portfolio, market momentum expected in Q4: Sunil Bothra, Minda Industries

Update on the Indian Equity Market:

On Thursday, Nifty closed 0.7% lower at 12,126. Among the stocks, ONGC(+2.5%), Vedanta (+1.9%) and JSW Steel (+1.0%) were the gainers. Yes Bank (-4.4%), Bharti Airtel (-2.0%), and Reliance (-1.9%) ended in the red. Nifty Media (+0.1%) and Nifty Metal (+0.6%) were the only sectors which ended in the positive. Nifty PSU Bank (-1.5%), Nifty Pharma (-0.9%) and Nifty Bank (-0.9%) were the worst-performing sectors.

Focus on vertical strengthening of product portfolio, market momentum expected in Q4: Sunil Bothra, Minda Industries

Excerpts from an interview with Mr Sunil Bothra, Executive Director and Group Chief Financial Officer, Minda Industries:

  • The existing sensor business is more than 5 years old and as part of their strategy, they are in a long-term partnership with Sensata Technologies.
  • Sensata, which was previously Texas Instruments have many businesses which are into defence and other technologies.
  • Minda Industries has entered into an agreement with Sensata to acquire the wheel speed sensor business. The agreement will help to acquire the customer base in India and South Korea and will also make global opportunities available.
  • Although the acquisition cost only ₹ 45 crore, it is expected to generate an additional revenue of ₹100-120 crore in the next four years. With this acquisition, the fresh investment in the sensor business will reach ₹ 145 crore and it is expected to generate revenue of ₹ 500-600 crore in the next 4-5 years.
  • The company has been focussing on vertically strengthening the product portfolio, which they have done by undertaking small acquisitions. Now that they have more than 30 businesses or products, the focus is on strengthening their technological capability and offering to the OEs.
  • The recently concluded acquisition of Delvis will help strengthen their technology position in 4-wheeler lamps, thereby strengthening the sensor business.
  • Talking about the demand, he said the company has seen some green shoots in October, which led to a little increase in volume in a few original equipment manufacturers in November.
  • Since December is generally a lean period, Q3 is not very bullish as compared to Q2.
  • Some market momentum is expected in Q4. But they will have to wait and see how the market pans out post the BS-VI launch from April 1, since there will be price impact of 10-12%.
  • If they are able to increase their kit value per car or 2-wheeler or OE in Q4, they are hopeful of continuing the overperformance in the near future.      

Consensus Estimate: (Source: market screener website)

  • The closing price of Minda Industries was ₹ 348 /- as of 26-December-19. It traded at 32.8 x/ 23.4x / 18.5x the consensus EPS estimate for FY20E/ FY21E/ FY22E of ₹ 10.6/14.9 /18.8 respectively.
  • Consensus target price of ₹ 383/- implies a PE multiple of 20.4x on FY22E EPS of ₹ 18.8/-.
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24 Dec

December is a big month for PVs: Ashish Kale, President, FADA

Update on the Indian Equity Market:

On Monday, NIFTY closed -0.1% lower. Among sectoral indices NIFTY PSU Bank (-1.3%), NIFTY Realty (-0.4%), and NIFTY FMCG (-0.5%) closed lower. while NIFTY Media (+0.9%) NIFTY Auto (+0.6%) Nifty Fin Services (+0.2%) closed on a positive note. The biggest losers were Yes Bank (-3.8%), Nestle (-2.4%), Reliance (-1.8%) whereas Zeel (+3.6%), Vedanta (+2.4%), Maruti (+1.6%) ended with gains.

Excerpts from an interview of Mr. Ashish Harsharaj Kale, President of Federation of Automobile Dealers Associations (FADA) with CNBC-TV18: 

  • Mr Kale said not just the companies, but even the dealers are currently at an inventory of 30-40 days.
  • The availability of fuel is now clear that it is going to be available only from April 1, pan India so most of the manufacturers have planned 100 percent production shift only by end of February or first week of March. So, dealers will continue to buy BS-IV vehicles and it will give a very short window of a month to liquidate the entire inventory.
  • Speaking about companies with larger inventories he said the Society of Indian Automobile Manufacturers (SIAM) would be better placed to talk about the inventory. About dealer inventory, the passenger vehicle (PV) inventory is at 30 days and both two-wheeler and commercial vehicle (CV) is at 40 days.
  • The demand situation in December is good but conversions have just started.
  • December is a big month for PV because of the year-end combined discounts that come in.
  • For two-wheelers and CVs enquires are coming.
  • Speaking about price hikes due to BS-VI transition, he says, few vehicles have already launched and the cost difference is between 10% to 13%.
  • In case of CVs the price change is anticipated to be in between 12% to 14%, although none of the manufacturers have come up with a BS-VI pricing.

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17 Dec

Motherson Sumi: FY20 revenue target will be achieved through acquisitions.

Update on the Indian Equity Market:

On Monday, NIFTY50 closed 0.2% lower. NIFTY IT (+1.0%), NIFTY REALTY (+0.3%), NIFTY FIN SERV (+0.1%) closed higher. NIFTY METAL (-1.3%), NIFTY FMCG (-1.2%, NIFTY AUTO (-1.0%) were the top losing sectors. Among NIFTY50 stocks, TCS (+2.8%), HCLTECH (+1.7%) and TECHM (+1.7%) were the top performers. GRASIM (-2.4%), ADANIPORTS (-2.3%) and ITC (-1.9%) were the top losers.

Motherson Sumi: FY20 revenue target will be achieved through acquisitions.

Excerpts from an interview with Vivek Chaand Sehgal, Chairman, Motherson Sumi Systems published in ET Auto dated 15th December 2019.

  • Motherson Sumi has projected $18 bn revenue for FY20. There is no further scope for organic growth and growth will come from acquisitions. The timing of acquisitions cannot be pre-planned. Due to pain in the system, valuations are very low and the management is standing by the March 2020 target.
  • New acquisitions have to be on the management’s terms. They require the new acquisitions to deliver 40% ROCE and are ready to walk away if the criterion is not met.
  • Management has 11 companies under the radar for acquisition. The topline could be anywhere between $30-35 bn. The timeline could be longer but management is confident to hit a number close to their topline target.
  • According to Mr Sehgal, the current situation in Indian automobile space is worse than the 2009 crisis. In 2009, a particular segment of the world was affected and the strike back was fast. Currently, the slowdown is prolonged. Every aspect of not just Indian but the global automotive industry is going through a churn.
  • Motherson is in a better place than peers because almost its entire order book and new plants cater to new models by OEMs.
  • Things should improve in the next 6-9 months with clarity on EU, hopeful end to the American trade war and shift to BS-VI in India.
  • On the global side, some stress is felt in India and China.   Europe is in little stress but is coming out of it. America is in a re-assessment mode and is thinking of build-in America.
  • Motherson has maintained a strategy such that no company, no component, no carmaker should contribute more than 15% of their turnover. In the last five years, they have opened around 34-35 plants around the world. They are working to set up plants in countries where needed. Motherson is not affected so much by the trade wars, because they are producing locally in those places.
  • Peers should focus on cutting costs to bring down the cost of parts.
  • Green shoots are visible but it is uncertain whether the industry has bottomed out.

Consensus Estimate (Source: market screener website)

  • The closing price of Motherson Sumi systems was ₹ 141/- as of 16-December-2019. It traded at 26.1x/ 20.7x/ 17.4x the consensus EPS for FY20E/FY21E/FY22E of ₹ 5.4/ 6.8/ 8.1 respectively.
  • Consensus target price of ₹ 145/- implies a PE multiple of 17.9x on FY22E EPS of ₹ 8.1/-.
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09 Dec

Ready for the transition to BS-VI; aim to be a global company at every level – Hero MotoCorp’s Dr Pawan Munjal

Update on the Indian Equity Market:

On Friday, NIFTY50 closed -0.8% lower at 11,921. NIFTY50 gainers include Infratel (+5.3%), Kotak Mahindra Bank (+1.6%) and JSW Steel (+0.7%). NIFTY50 losers include Yes Bank (-10.5%), SBI (-5.3%) and Zee Entertainment (-4.6%). PSU Bank (-4.4), Media (-3.4%), and Auto (-1.7%) were the top losing sectors. There were no sectoral gainers in the Friday trade.

Excerpts from an interview with Dr Pawan Munjal, Chairman, MD & CEO, Hero MotoCorp Ltd. The interview was published in CNBCtv18 dated 05th December 2019

·        They are set for a quick transition to BS-VI. The company has already discontinued over 50 BS-IV products.

·       Hero is leading a charge on the BS-VI front, according to Dr Munjal. The first BS-VI motorcycle introduced in India is from Hero and currently, they are working on all the other range of products. They have already started production of various other models. Over the next 1 or 2 months, Hero will be probably transitioning into BS-VI with the entire range.

·        Dr Munjal said there seems to be a slowdown across the globe, especially in oil markets and thus, many of their global markets are oil-dependent markets. Hero has seen market shrinking, they have seen Columbia & Nigeria market shrinking, and Argentina going through hell and similarly, many other markets facing a lot of headwinds.

·        Hero has gone back and looked at their strategies. They had planned to go to 50 markets. However, right now Hero will focus on the big markets and try and increase their market share in these markets.

Recently Hero introduced the X-Pulse and some of the other new bikes in the 200 CC range. They received an excellent response, from the customers. Hero has more such stuff in the pipeline coming in the premium segment. It is not just the products, it is the brand, the marketing and the 360 around the brand that the Company is doing.

·        Hero is working with the global consultants on the visual identity and the insides of their dealership. Hero will be changing a lot of stuff in their outlets soon.

·        Hero is a global company not just in terms of selling the products into global markets but they have gone into other markets with manufacturing in Columbia and Bangladesh. Thus, the Company is trying to become a global company at every level.

In terms of diversity, there is gender, cultural diversity and there is a diversity of different nations, which are becoming part of Hero.

·        Hero is well on its way to the electrification of its products. A team is working on the engineering and research part of the electric product. Hero will be bringing its electric products but no timeframe promised as of now.

·        Tiger Woods is captaining the US team for the President Cup in Melbourne for Hero MotoCorp. The relationship between Tiger Woods and Hero MotoCorp has been of great benefit. Hero is a huge brand in India. Hero was mostly a domestic brand but when they started going out of India into various other markets whether it was Africa, Latin America, Central America, the brand was almost unknown in other markets, other countries. Hero’s association with Tiger gave them that immediate recognition in these markets.

·        When asked about the biggest lesson learnt by the Company from what has happened over the last year from this slowdown, Dr Pawan Munjal said “Life is not always about going north. There will be challenges in life, there will be difficult times in life, sales will go up sometimes, sales will come down sometimes, the economy will go up and the economy will come down sometimes. So, we need to be prepared to face these challenges. When required, we need to buckle up our shoes and tighten our belts and do whatever best we can do for our consumers and customers to be able to give them the right product and the right quality.”

Consensus Estimate (Source: market screener website)

·        The closing price of Hero MotoCorp Ltd was ₹ 2,362/- as of 06-December-19. It traded at 14x/ 13x/ 12x the consensus EPS estimate for FY20E/ FY21E/ FY22E of ₹ 174/ 177/ 196 respectively.

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04 Dec

Bajaj Auto- Exports saved the day for Bajaj Auto in November.

Excerpts from an interview of Mr Rakesh Sharma- ED- Bajaj Auto with CNBC- TV18

Update on the Indian Equity Market:

On Tuesday, NIFTY closed 0.5% lower. Among sectoral indices NIFTY PSU Bank (-2.9%), NIFTY Metal (-2.6%), and NIFTY Media (-2.4%) closed lower. While NIFTY Realty (+1.3%) and NIFTY IT (+0.5%) closed on a positive note. The biggest losers were Yes Bank (-7.6%), Bharti Infratel (-5.8%), Tata steel (-5.2%), whereas Bajaj Auto (+3.1%), Bajaj FinServ (+1.7%) and TCS (+1.6%) ended with gains.

  • They do not expect the sales in the month of December to hit      4 lakhs because it is a seasonally weak month.
  • Exports will continue to grow. But 3 wheelers and the domestic market will see a pullback when the model year changes.
  • The company is holding steady margins and there is no sacrifice of margins.
  • There is no need to shore up the sales in an unnatural way as November and December follow a high season period.
  •  The mix is holding steady for the company, 3-wheeler are improving and there is a gentle tailwind on the exchange rate side. So, the margins are not going to see any shift
  •  Speaking about international markets and exports, the international performance is steady and solid and the key driver for this has been the African continent where the economies are doing well.
  • Bajaj has a competitive position in the African continent, with every 3 bikes sold one is of Bajaj.
  •  Bangladesh and the Philippines are acting as bright stars and are an important market for Bajaj.
  • These markets are doing better than industry and are in top-10 markets for the company.
  •  Speaking about price hikes post BS-VI transition, Bajaj will have to look internally and externally but certainly, the prices will increase.
  • Given the situation of the economy any kind of price increase will have a dampening effect on the demand.

Consensus Estimate (Source: market screener)

·        The closing price of Bajaj Auto Ltd was ₹ 3261/- as of 03-December-2019. It traded at 18.5x/ 17.3x/ 16.8x the consensus EPS for FY 20E/ FY 21E/ FY 22E of ₹ 176/ 188/ 194 respectively.

·        Consensus target price of ₹ 3,069/- implies a PE multiple of 15.8x on FY22E EPS of ₹ 194/-.

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