Sector Update| 2 March 2020
Automobiles
Bajaj Auto
CMP: INR2,798
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
BJAUT IN
289
809.6 / 11.2
3315 / 2400
-7/-1/-8
TP: INR3,400 (+22%)
Neutral
Wholesales in line at 465k units (-10% YoY)
Domestic volumes down ~25% YoY, exports up 9% YoY
Financials Snapshot (INR b)
FY20E FY21E FY22E
Y/E March
Sales
302
336
370
EBITDA
49.9 55.2 62.3
Adj. PAT
52.0 55.6 62.8
EPS (INR)
180
192
217
EPS Gr. (%)
8.5
6.9 13.1
BV/Sh. (INR)
843
940 1,049
Ratios
RoE (%)
22.5 21.5 21.8
RoCE (%)
20.5 19.6 20.0
Payout (%)
43.5 43.8 44.3
Valuation
P/E (x)
15.6 14.6 12.9
P/BV (x)Rs
3.3
3.0
2.7
Div. Yield (%)
2.3
2.5
2.9
FCF Yield (%)
6.6
7.1
7.1
BJAUT's sales declined ~10% YoY to 465k units (in-line) in Feb’20.
Domestic volumes were down ~25% YoY at 165.7k units (our estimate: 176.5k),
whereas exports increased 8.6% YoY to 186.2k units (our estimate: 189k).
2W volumes declined 5.4% YoY to 310.2k units. Domestic motorcycle dispatches
fell 24% YoY to 168.7k units. Motorcycle exports grew 8.6% YoY to 186.2k units.
3W volumes declined by 31.4% YoY to ~45k units (our estimate: 58.5k units) as
domestic volumes were down 38% at 21.9k units, whereas exports were up 24%
YoY at 22.8k units.
According to Mr. Rakesh Sharma, ED, Bajaj Auto Ltd, "The underlying economic
situation remains as it was before, which is a high single digit decline in the
retail industry and on top of it there are issues of transition from BS-IV to BS-VI,
which will add costs April onwards. So, the combination of a weak economic
backdrop combined with added costs makes the outlook for April-June quarter
quite weak for domestic business. Exports have had an outstanding run. We had
the highest ever quarter in Q3, we had the highest ever sales in January and we
have had strong growth of 15 percent in February. However, we are watchful
about the impact of coronavirus. As yet there is no impact in our markets
because of that. Some disruption in Chinese supply chains of motorcycles will
definitely be an area of opportunity for a company like us, who commands 35
percent market share in Africa. Therefore, I expect the export performance to
continue January and February the way it has been doing in Q3".
The stock trades at 14.6x/12.9x FY21E/22E consol. EPS. Maintain
Neutral.
Snapshot of volumes for Feb-20
YoY
Company Sales
Bajaj Auto
Motorcycles
Total Two-Wheelers
Three-Wheelers
Domestic
Exports
Residual Residual FY20 YTD
Growth Monthly Monthly
YoY (%)
MoM
FY20
Feb-20 Feb-19
Jan-20
FY20 YTD FY19 YTD (%) chg
Gr. (%)
(%) Run rate Run rate
(%) chg
estimate
chg
-6.0
-5.2
-5.2
-10.2
-14.3
5.8
-11.9
-13.4
-13.4
-4.8
-26.1
15.6
3,46,646
2,80,181
2,80,181
66,465
1,91,616
1,55,030
3,97,512
3,39,690
3,39,690
57,822
2,11,597
1,85,916
MoM
3,54,913 3,93,089 -9.7 3,94,473 -10.0 43,72,637 46,26,152 -5.5 47,19,283
3,10,222 3,27,985 -5.4 3,32,342 -6.7 37,36,592 39,13,335 -4.5 40,16,773
3,10,222 3,27,985 -5.4 3,32,342 -6.7 37,36,592 39,13,335 -4.5 40,16,773
44,691 65,104 -31.4 62,131 -28.1 6,36,045 7,12,817 -10.8 7,02,510
1,68,747 2,21,706 -23.9 1,92,872 -12.5 23,27,566 26,81,588 -13.2 25,19,182
1,86,166 1,71,383 8.6 2,01,601 -7.7 20,45,071 19,44,564 5.2 22,00,101
Jinesh Gandhi - Research analyst
(Jinesh@MotilalOswal.com); +91 22 3982 5416
Research analyst: Aanshul Agarawal
(Aanshul.agarawal@MotilalOswal.com);
+91 22 7193 4337
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
Automobiles | Update
Eicher Motors
CMP: INR17,006
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
EIM IN
27
464.3 / 6.4
23428 / 15197
-11/5/-20
TP: INR25,350(+49%)
Buy
Royal Enfield volumes in line at 63.5k units
Royal Enfield (RE) dispatches were in-line at 63.5k units (flat YoY).
Component sourcing from China affected BS6 component supplies. This may
impact BS6 production for RE motorcycles in near future.
The stock trades at 19.3x/15.1x FY21E/22E consol. EPS. Maintain
Buy.
Financials Snapshot( INR b)
Y/E March
FY20E FY21E FY22E
Net Sales
94.5 109.3 129.4
EBITDA
23.6 28.4
35.6
Adj. PAT
20.3 24.0
30.7
Adj. EPS (INR) 744.7 880.0 1,124.8
EPS Gr. (%)
-8.5 18.2
27.8
BV/Sh. (INR)
3,875 4,607 5,566
Ratios
Net D/E (x)
-0.7
-0.7
-0.8
RoE (%)
20.8 20.8
21.6
RoCE (%)
20.2 20.3
21.6
Valuations
P/E (x)
22.8 19.3
15.1
P/BV (x)
4.4
3.7
3.1
EV/EBITDA (x) 14.3 11.4
8.4
Div. Yield (%)
0.7
0.7
0.8
FCF Yield (%)
3.0
3.1
4.2
Snapshot of volumes for Feb-20
YOY
Eicher Motors
Royal Enfield
Feb-20
63,536
Feb-19
62,630
MoM
YoY (%)
MoM
Jan-20
chg
(%) chg
1.4 63,520
FY20
YTD
FY19
YTD
FY20
Residual Residual
YTD
Growth Monthly
Monthly
FY20 YoY (%)
(%) Run rate
(%) chg
Run rate
estimate chg
-13.8 7,22,321
-12.6
2.4
62,295
60,002
0.0 6,60,026 7,65,267
2 March 2020
2
 Motilal Oswal Financial Services
Automobiles | Update
Hero MotoCorp
CMP: INR1,974
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
HMCL IN
200
394.3 / 5.4
3021 / 1960
-15/-27/-32
TP: INR2,504 (+27%)
Neutral
Wholesales above estimate at 498.2k units
Coronavirus outbreak hurts supply side ahead of BS6 transition
Financials Snapshot (INR b)
Y/E March
Sales
EBITDA
Adj. PAT
Adj. EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
Ratios
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
Div. Yield (%)
FCF Yield (%)
2020E 2021E 2022E
293.5 325.1 354.2
42.6 45.7 50.9
31.6 34.4 37.9
157.9 171.9 189.5
-6.8
8.8 10.2
691.7 749.1 812.1
23.7
22.9
55.7
12.5
2.9
4.6
11.3
23.9
23.1
63.6
11.5
2.6
4.8
7.9
24.3
23.5
63.7
10.4
2.4
5.3
8.9
HMCL's volumes declined ~19% YoY to 498.2k units (our estimate: 465k) in
Feb’20.
HMCL trades at 11.5x/10.4x FY21E/22E EPS. Maintain
Neutral.
Snapshot of volumes for Feb-20
YoY
MoM
Residual
Residual
FY20 YTD
YoY
MoM
Monthly
Monthly
(%)
FY20
Gr. Growth
Company Sales Feb-20 Feb-19 (%) Jan-20 (%) FY20 YTD FY19 YTD
(%)
Run rate
Run rate
chg estimate (%)
chg
chg
Hero MotoCorp 4,98,242 6,17,215 -19.3 5,01,622
-0.7 60,75,072 72,39,436 -16.1 65,28,390 -16.5
-22.0
4,53,318
5,52,279
2 March 2020
3
 Motilal Oswal Financial Services
Automobiles | Update
CMP: INR 420
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Financials Snapshot (INR b)
Y/E March
Sales
EBITDA
Adj. PAT
EPS Gr. (%)
BV/Sh. (INR)
Ratios
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
Div. Yield (%)
FCF Yield (%)
31.6
5.3
0.9
3.7
24.1
4.6
1.0
4.2
18.5
3.8
1.0
5.6
17.8
17.2
33.9
20.4
21.3
27.6
22.5
24.9
21.2
TVS Motor
TP: INR 460 (+9%)
Neutral
TVSL IN
475
Domestic sales down ~29% YoY, exports up ~25% YoY
199.6 / 2.8
525 / 340
TVSL's Feb’20 wholesales stood at 253.3k units (in line with our estimate of
-5/11/-16
Wholesales above estimate at 253.3k units (-15% YoY)
2020E 2021E 2022E
165.1 188.7 210.2
14.0
6.3
-5.6
79.3
17.5
8.3
17.4
31.0
91.9
21.2
10.8
22.7
30.4
109.8
Adj. EPS (INR) 13.3
216.4k).
Domestic volumes declined ~29% YoY, while exports grew ~25% YoY.
Motorcycle volumes were down ~3% YoY at 118.5k units (above our estimate of
85k).
Scooter volumes declined ~30% YoY to 60.6k units (our estimate: 68k).
Moped dispatches declined ~26% YoY to ~57k units (our estimate: 49k).
3W volumes increased 26% YoY led by healthy export sales.
According to the company, planned production in Feb-20, was impacted by 10%,
due to supply issues from China after Coronavirus outbreak, with no impact on
dealer dispatches for the month.
The stock trades at 24.1/18.5x FY21E/22E EPS. Maintain
Neutral.
Snapshot of volumes for Feb-20
YoY
Company Sales Feb-20 Feb-19
TVS Motor
2,53,261 2,99,353
Motorcycles
1,18,514 1,22,551
Scooters
60,633 86,935
Mopeds
56,744 76,125
Three-Wheelers 17,370 13,742
Total Domestic 1,70,384 2,32,783
Total Exports
82,877 66,570
MoM
YoY
MoM
(%) Jan-20 (%) FY20 YTD FY19 YTD
chg
chg
-15.4 2,34,920
7.8 31,18,729 35,88,418
-3.3 94,367 25.6 12,96,906 14,18,211
-30.3 72,383 -16.2 10,41,028 12,02,638
-25.5 53,689
5.7 6,17,635 8,25,579
26.4 14,481 20.0 1,63,160 1,41,990
-26.8 1,64,136
3.8 23,28,108 29,03,085
24.5 70,784 17.1 7,90,621 6,85,333
(%)
chg
-13.1
-8.6
-13.4
-25.2
14.9
-19.8
15.4
FY20
estimate
33,43,324
13,62,784
11,35,062
6,62,986
1,76,843
24,91,873
8,51,451
Gr.
(%)
-14.6
-12.7
-12.8
-26.1
13.0
-20.9
11.8
Residual
Growth
(%)
-31.0
-53.7
-4.5
-36.4
-5.3
-34.2
-20.4
Residual
Monthly
Run rate
2,24,595
65,878
94,034
45,351
13,683
1,63,765
60,830
FY20 YTD
Monthly
Run rate
2,83,521
1,17,901
94,639
56,149
14,833
2,11,646
71,875
2 March 2020
4
 Motilal Oswal Financial Services
Automobiles | Update
Ashok Leyland
CMP: INR74
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
TP: INR95 (+28%)
Buy
AL IN
2,927
MHCVs sales decline ~45% YoY, while LCVs decline ~17% YoY
217.1 / 3
98 / 57
0/14/-20
Feb’20 wholesale dispatches were above our estimate at 11.5k units (+7.5%
Wholesales above estimate at 11.5k units
Financials Snapshot( INR b)
Y/E March
2020E 2021E 2022E
Sales
175.4 214.3 256.7
EBITDA
10.7
18.8
27.5
Adj. PAT
3.0
8.8
14.7
Adj. EPS (INR)
1.0
3.0
5.0
YoY).
M&HCV volumes (64% of total volumes in Feb’20) declined by ~45% YoY (-5%
MoM) to 7.4k units (our estimate: 5.5k).
LCV volumes declined ~17% YoY to 4.1k units (our estimate: 3.8k).
The stock trades at 24.7/14.8x FY21E/22E EPS, and at 8.1x EV/EBITDA. Maintain
Buy.
EPS Gr. (%)
BV/Sh. (INR)
Ratios
RoE (%)
ROCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div. Yield (%)
FCF Yield (%)
-85.3 194.0
26.5
3.7
3.9
221.1
72.7
2.8
21.3
3.0
-3.4
26.8
11.2
9.8
75.2
24.7
2.8
12.1
3.0
5.4
66.8
28.8
18.0
15.5
50.1
14.8
2.6
8.1
3.4
7.5
Snapshot of volumes for Feb-20
YoY
Company Sales
Ashok Leyland
CV (ex LCV)
LCV
Feb-20
11,475
7,368
4,107
Feb-19
18,245
13,291
4,954
MoM
YoY (%)
MoM
Jan-20
chg
(%) chg
-37.1 11,850
-44.6 7,754
-17.1 4,096
FY20
YTD
FY19
YTD
(%) chg
FY20
estimate
-3.2 1,23,076 1,75,826
-5.0 76,778 1,26,822
0.3 46,298 49,004
-30.0 1,29,681
-39.5 80,692
-6 48,988
FY20
Residual Residual
YTD
Growth Monthly
Monthly
Gr. (%)
(%) Run rate
Run rate
-34.3
-69.3
6,605 11,189
-43.5
-75.6
3,914
6,980
-10.1
-51.1
2,690
4,209
2 March 2020
5
 Motilal Oswal Financial Services
Automobiles | Update
Mahindra & Mahindra
CMP: INR459
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
TP: INR666 (+45%)
Buy
MM IN
1,209
Domestic vols up 21% YoY, exports decline 22% YoY
570.3 / 7.9
704 / 445
-12/-13/-35
MM's tractor volumes stood at 22.6k units (above our estimate of 20k) – an
Tractors volumes above estimates at 22.6k
Financials Snapshot( INR b)
Y/E MARCH
FY20 FY21E FY22E
Sales
476 518 564
EBITDA
60.2 65.1 73.5
Adj. PAT *
39.3 44.1 48.7
Adj. EPS (INR)
33.0 37.0 40.9
EPS Gr. (%)
-23.3 12.0 10.6
BV/Sh. (INR)
315 339 367
Ratios
RoE (%)
11.1 10.4 10.7
RoCE (%)
10.4 9.8 10.1
Payout (%)
30
34
31
Valuations
P/E (x)
13.9 12.4 11.2
P/BV (x)
1.5 1.4 1.3
Div. Yield (%)
2.2 2.2 2.2
FCF Yield
3.6 6.2 7.8
(incl MVML)
increase of ~19% YoY (flat MoM).
Commenting on the performance, Rajesh Jejurikar, President - FES, M&M Ltd.
said, "We are happy to see a growth of 21% in domestic tractor sales over last
year. We have sold 21,877 tractors in the domestic market during February,
2020. The tractor demand trend is expected to strengthen on the back of a
robust Rabi output and the prevailing crop prices. Going forward, the increase in
rural and agri spending on core schemes by the Government should augur well
for the industry. In the exports market, we have sold 684 tractors".
The company also reported supply disruption from China for BS6-related parts,
impacting ramp-up of BS6 production. This resulted in a decline in billing
volumes in Feb’20.
The stock trades at 12.4x/11.2x FY21/22E consol. EPS. Maintain
Buy.
Snapshot of volumes for Feb-20
YoY
Company Sales
Residual Residual FY20 YTD
Growth Monthly Monthly
YoY (%)
FY20
MoM
Feb-20 Feb-19
FY20 YTD FY19 YTD (%) chg
Gr. (%)
Jan-20
(%) Run rate Run rate
estimate
chg
(%) chg
18.9
23,116
-2.4
2,88,302 3,10,748
-7.2
3,06,975
-12.9
-55.3
18,673
26,209
MoM
Mahindra & Mahindra
(Tractors)
22,561 18,978
2 March 2020
6
 Motilal Oswal Financial Services
Automobiles | Update
Escorts
CMP: INR843
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
TP: INR782 (-7%)
Neutral
ESC IN
123
Domestic sales up ~16% YoY
103.4 / 1.4
914 / 423
Escorts’ tractor dispatches grew ~19% YoY to 8.6k units (our estimate: 7.7k).
13/80/19
Wholesales of 8.6k units exceed estimate
Financials Snapshot( INR b)
Y/E March
2020E 2021E 2022E
Sales
60.9
66.6
74.4
EBITDA
6.9
8.1
9.1
Adj. PAT
5.1
5.7
6.5
EPS (INR)
57.4
64.3
73.4
EPS Gr. (%)
7.8
12.1
14.0
BV/Sh. (INR)
353.3 412.0 479.7
Ratios
RoE (%)
17.5
16.8
16.5
RoCE (%)
21.9
22.5
22.3
Payout (%)
8.3
8.6
7.6
Valuations
P/E (x)
14.7
13.1
11.5
P/BV (x)
2.4
2.0
1.8
EV/EBITDA (x)
10.1
8.4
7.0
Div. Yield (%)
0.4
0.4
0.4
FCF yield (%)
6.8
3.7
4.6
Domestic sales grew 16% YoY to ~8k units.
Exports increased 72% YoY to 552 units.
The stock trades at 13.1x/11.5x FY21/22E EPS. Maintain
Neutral.
Snapshot of volumes for Feb-20
YoY
Company Sales
Escorts
Domestic
Exports
Feb-20
8,601
8,049
552
Residual Residual FY20 YTD
Growth Monthly Monthly
YoY (%)
FY20
MoM
Feb-19
FY20 YTD FY19 YTD (%) chg
Gr. (%)
Jan-20
(%) Run rate Run rate
estimate
chg
(%) chg
7,240
6,918
322
18.8
16.3
71.4
6,063
5,845
218
41.9
37.7
153.2
80,574
77,024
3,550
84,507
81,892
2,615
-4.7
-5.9
36
92,073
88,248
3,825
-4.5
-5.4
24
-3.4
-1.8
-42.0
11,499
11,224
275
7,325
7,002
323
MoM
2 March 2020
7
 Motilal Oswal Financial Services
Automobiles | Update
Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
Expected return (over 12-month)
>=15%
< - 10%
> - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In
case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30 days take appropriate measures to make the recommendation
consistent with the investment rating legend.
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Investment Advisory Services, Depository participant services & distribution of various financial products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of
which are available on
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and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited
(CDSL) National Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory & Development Authority of India (IRDA) as
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Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance
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* MOSFL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law Tribunal, Mumbai Bench.
Disclosure of Interest Statement
Analyst ownership of the stock
Companies where there is interest
No
2 March 2020
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