Presentation on Auto Sector · Maruti Suzuki’s market share continues to move north. Auto Sector...

Presentation on Auto Sector

24th Jul’18

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Auto Sector – Importance to the Economy

Automobile Industry contributes around 7.1% to India’s GDP by volume

Automotive sector provided direct and indirect employment to ~32 mn in 2016

India key auto manufacturing hubs: Delhi-Gurgaon-Faridabad in the North

Mumbai-Pune-Nashik-Aurangabad in the West

Chennai- Bengaluru-Hosur in the South

Jamshedpur-Kolkata in the East

FDI received by the sector between April 2000 and December 2017 - USD 18.43 bn

Source - www.makeinindia.com

Auto Sector – Two wheeler Segment

15 16 18 19 21 24 28 31 32 33

79 78 76 75 73 71 67 65 63 63

6 6 6 6 6 5 5 4 5 4

-

10

20

30

40

50

60

70

80

90

100

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

Two wheeler - Domestic Segment Mix (%)

Scooters Motorcycle Moped

Source - SIAM

Source - SIAM

10 year domestic Two wheeler volume CAGR is 11%

Scooter segment share is gradually inching up

-

5

10

15

20

25

30

-

5

10

15

20

25


Two wheeler - Domestic Sales Volume

Million units (LHS) % growth (RHS)


(20)

(10)

-

10

20

30

40

50


Domestic Two wheeler - Segment-wise growth (%)

Scooters Motorcycle Moped

Source - SIAM

Source - SIAM

-

20

40

60


Domestic Market Share Change (%)

Bajaj Auto Hero MotoCorp *Honda Motorcycle and Scooters India TVS MotorsOthers

*Hero and Honda separated in Dec 2010

Scooter segment has consistently outperformed motorcycle segment growth rate

Market Share gap between Hero MotoCorp and HMSI has narrowed


Volume growth outlook positive

Pick-up in rural demand

Motorcycle demand is picking up

Over the longer term, scooter segment share to witness further rise for the industry

Price war in the entry level motorcycle segment

Commodity cost pressure in the near term

Electric Vehicle

Auto Sector – Passenger Vehicle Segment

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0


Passenger Vehicle - Segment Mix (%)

Passenger Car Utility Vehcile Vans

Source - SIAM

Source - SIAM

10 year domestic Passenger Vehicle volume CAGR is 8%

Share of Utility Vehicle segment is increasing over the past few years

(10)

(5)

-

5

10

15

20

25

30

35

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5


Passenger Vehicle - Domestic Sales Volume

Million units (LHS) % growth (RHS)


(30)

(20)

(10)

-

10

20

30

40

50

60


Passenger Vehicle - Segment growth (%)

Passenger Car Utility Vehcile Vans

-

10

20

30

40

50

60


Passenger Vehicle - Domestic Market Share (%)

Hyundai Motor India Mahindra & Mahindra Maruti Suzuki India

Tata Motors Others

Source - SIAM

Source - SIAM

UV segment has grown significantly in the past two years

Maruti Suzuki’s market share continues to move north


New products continue to drive volume growth for the industry

Past few years has seen demand shifting towards petrol run vehicles

Top 5 players accounts for ~85% of the domestic volumes

Rising commodity prices

BSVI implementation, Challenges from Electric Vehicle disruptions

Long term growth outlook remains strong on rising income levels and increasing carpenetration

Auto Sector – Commercial Vehicle Segment

Source - SIAM

Source - SIAM

10 year domestic Commercial Vehicle volume CAGR is 5%

LCV sales is witnessing gradual improvement

(30)

(20)

(10)

-

10

20

30

40

-

1,00,000

2,00,000

3,00,000

4,00,000

5,00,000

6,00,000

7,00,000

8,00,000

9,00,000


Domestic Commercial Vehicle Sales Volume

Units (LHS) % growth (RHS)

(30)

(20)

(10)

-

10

20

30

40

50

-

1,00,000

2,00,000

3,00,000

4,00,000

5,00,000

6,00,000


Domestic LCV Sales Volume


Auto Sector – Commercial Vehicle Segment

Source - SIAM

Source - SIAM

MHCV segment has completed 4 years of upcycle

Ashok Leyland gained market share at the expense of Tata Motors

(40)

(30)

(20)

(10)

-

10

20

30

40

-

50,000

1,00,000

1,50,000

2,00,000

2,50,000

3,00,000

3,50,000

4,00,000


Domestic MHCV Sales Volume


-

10

20

30

40

50

60

70


MHCV - Domestic Market Share (%)

Ashok Leyland Ltd Tata Motors Ltd VE CVs - Eicher Others

Auto Sector – Medium & Heavy Commercial Vehicle Segment

Highly cyclical segment; performance linked to the economy

MHCV segment dominated by two players

Shift towards higher tonnage vehicle

Recent new norms on increased load carrying capacity has led to uncertainity

Pre-buying ahead of BSVI implementation

Scrappage policy

Auto Sector – Tractor Segment

Source – M&M

Tractor volume growth has been robust for the past two years

(20)

(10)

-

10

20

30

40

-

1,00,000

2,00,000

3,00,000

4,00,000

5,00,000

6,00,000

7,00,000

8,00,000


Domestic Tractor Sales Volume


Auto Sector – Tractor Segment

Strong rural economy channelizing into robust tractor demand

FY19 is the third year of tractor industry upcycle

IMD forecast of normal monsoon

Industry players have guided for 9-11% volume growth in FY19

Rise in MSP, shortage of labor are positive for the industry

Auto Sector – Commodity Prices

0

200

400

600

800

1000

1200A

pr-

08

Oct

-08

Ap

r-0

9

Oct

-09

Ap

r-1

0

Oct

-10

Ap

r-1

1

Oct

-11

Ap

r-1

2

Oct

-12

Ap

r-1

3

Oct

-13

Ap

r-1

4

Oct

-14

Ap

r-1

5

Oct

-15

Ap

r-1

6

Oct

-16

Ap

r-1

7

Oct

-17

Ap

r-1

8

China Hot Rolled Steel Export Price Shanghai (USD/MT)

0

500

1000

1500

2000

2500

3000

3500

Ap

r-0

8

Oct

-08

Ap

r-0

9

Oct

-09

Ap

r-1

0

Oct

-10

Ap

r-1

1

Oct

-11

Ap

r-1

2

Oct

-12

Ap

r-1

3

Oct

-13

Ap

r-1

4

Oct

-14

Ap

r-1

5

Oct

-15

Ap

r-1

6

Oct

-16

Ap

r-1

7

Oct

-17

Ap

r-1

8

LME Primary Aluminum 3 Month Rolling Forward (USD/MT)

0

2000

4000

6000

8000

10000

12000

Ap

r-0

8

Oct

-08

Ap

r-0

9

Oct

-09

Ap

r-1

0

Oct

-10

Ap

r-1

1

Oct

-11

Ap

r-1

2

Oct

-12

Ap

r-1

3

Oct

-13

Ap

r-1

4

Oct

-14

Ap

r-1

5

Oct

-15

Ap

r-1

6

Oct

-16

Ap

r-1

7

Oct

-17

Ap

r-1

8

LME Copper 3 Month Rolling Forward (USD/MT)

0

500

1000

1500

2000

2500

3000

Ap

r-0

8

Oct

-08

Ap

r-0

9

Oct

-09

Ap

r-1

0

Oct

-10

Ap

r-1

1

Oct

-11

Ap

r-1

2

Oct

-12

Ap

r-1

3

Oct

-13

Ap

r-1

4

Oct

-14

Ap

r-1

5

Oct

-15

Ap

r-1

6

Oct

-16

Ap

r-1

7

Oct

-17

Ap

r-1

8

LME Lead 3 Month Rolling Forward (USD/MT)

Source - Bloomberg Source - Bloomberg

Source - Bloomberg Source - Bloomberg

Auto Sector – Valuations


Ashok Leyland 13 9 19 11 6 7 17 15 24 24

Bajaj Auto 16 11 5 12 147 165 18 16 21 21

Eicher Motors * 21 15 40 20 1,011 1,222 27 22 34 31

Escorts 15 6 39 5 55 58 16 15 20 18

Hero MotoCorp 12 10 13 11 207 229 15 14 33 31

Mahindra and Mahindra 12 11 11 7 38 40 24 23 14 13

Maruti Suzuki 16 15 30 25 333 414 29 23 22 23

Tata Motors 10 10 (1) 26 20 25 13 11 7 8

TVS Motors * 17 15 32 30 19 24 29 23 28 28

EPS (Rs) PE (x) RoE (%)Revenue growth (%) Net Profit growth

Source – Kotak Securities PCG; * Bloomberg estimates

Top Picks – Maruti Suzuki, Mahindra and Mahindra

Kotak Securities - Private Client Group - Path: Login to www.kotaksecurities.com > Research > Equity Reports > Stock Recommendation Snapshot

Kotak Securities - Institutional Equities - Path: Login to www.kotaksecurities.com > Research > Equity Reports > India Daily Institutional Equities Research Report

http://www.kotaksecurities.com/

http://www.kotaksecurities.com/

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Presentation on Auto Sector · Maruti Suzuki’s market share continues to move north. Auto Sector...

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