Sector Update| 2 January 2017
Automobiles | Update
Automobiles
Bajaj Auto
CMP: INR2,809
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
BJAUT IN
289.4
812.8/11.9
3,122/2,173
2/-2/4
n
n
TP: INR3,432 (22% upside)
Buy
Jan-17 below est at 242k (v/s est 262k); decline of 18%YoY
Domestic vols decline 17% YoY on demonetization impact; Exports continue
to fall
n
n
n
n
BJAUT’s Jan-17 sales were below est, at 241,917 units (v/s est ~262,000), decline of
18% YoY. Domestic volumes declined by 16.5% YoY (+13% MoM) while exports
continued to decline with 19% YoY. Our FY17 estimates indicate a 5% decline implying
a residual growth of 3% or 297k units/month of run rate.
Domestic volumes at ~135.2k units (v/s est 147.5k units), declined by 17% YoY.
Motorcycle volumes declined by 16% YoY due to the impact of demonetization.
Domestic motorcycle sales were down 15% YoY (+12% MoM) to 119k units on account
of demonetization impact. While there was a MoM recovery, YoY still continues to be
under pressure. Motorcycle exports continued to fall, with a 18% YoY decline as
problems in export markets persisted.
3W volumes were the worst hit on demonetization impact. Domestic 3Ws declined by
27% YoY while 3W exports fell by 26% YoY. 3Ws were the worst hit in Bajaj’s portfolio.
Export volumes declined by 19% YoY (+1% MoM) as problems related to availability of
currency persited in key African markets. Besides, devaluation of currency has
impacted the purchasing power leading to slump in demand.
The stock trades at 17.5x/15.4x FY18E/19E EPS. Maintain Buy.
Snapshot of volumes for Jan-17
Jan-17
Total volume
Motorcycles
Three-Wheelers
Domestic
Exports
241,917
211,824
30,093
135,188
106,729
Jan-16
293,939
252,988
40,951
161,870
132,069
YoY (%)
-17.7
-16.3
-26.5
-16.5
-19.2
Dec-16
225,529
203,312
22,217
119,725
105,804
MoM (%)
7.3
4.2
35.5
12.9
0.9
FY17-YTD
3,120,154
2,730,739
389,415
1,926,229
1,193,925
FY16-YTD
Chg
(%)
FY17
estimate
Residual
YoY Resi-dual Gr.
Monthly
(%)
(%)
Run rate
2.9
4.7
-8.7
-6.8
21.0
297,384
261,494
35,890
176,146
121,238
3,315,062 -5.9 3,714,923 -4.6
2,858,721 -4.5 3,253,728 -3.1
456,341 -14.7
461,195 -13.8
1,775,911 8.5 2,278,522
5.8
1,539,151 -22.4 1,436,401 -17.4
Jinesh Gandhi
(Jinesh@MotilalOswal.com); +91 22 3982 5416
Aditya Vora
(Aditya.Vora@MotilalOswal.com); +91 22 3078 4701
2 January 2017
Investors are advised to refer through important disclosures made at the last page of the Research Report.
1
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Sector Update| 2 January 2017
Automobiles | Update
Hero Motocorp
CMP: INR3226
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
HMCL IN
199.7
644.2/9.5
3,740/2,375
0/-7/13
n
n
n
TP: INR3,120 (-3%)
Neutral
In-line at ~487k (v/s est ~485k); decline of 13% YoY
HMCL’s Jan-17 volumes declined 13.5% YoY (+48% MoM), to 487,088 units (v/s est
485,000) as demonetization impact hit volumes.
Our FY17 estimates indicate a 1% growth implying a residual growth of 0.2% or 580k
units/month of run rate.
The company said that there is a positive change in the market sentiments, which is
reflected in the improved off-take, and the company expects industry sales to
gradually return towards normalcy.
It further stated that in the month of January, the company added yet another
significant market to its global operations, with the launch of brand Hero in Argentina.
The company now has operations in 35 countries across Asia, Africa, South and Central
America. Hero MotoCorp also unveiled the new Glamour in Argentina, its first ever
global product launch outside India.
HMSI on the other hand witnessed 3% YoY growth to 389,486 units.
Yadvinder Singh Guleria, Senior Vice President – Sales & Marketing, Honda Motorcycle
& Scooter India said, “January 2017 saw customer sentiments improving at the onset
of festive and marriage season. Growing even when industry declined, Honda has
entered 2017 with all time high domestic market share of 29.2%. The impact of
demonetization was felt maximum on rural segment. Budget 2017 presented today by
Finance Minister has firm thrust on rural and agro-economy through farm credit, rural
infrastructure, poverty alleviation, road construction and direct taxation benefits.
With almost 50% of two-wheeler demand coming from rural and semi-urban India,
n
n
n
n
Budget 2017 should have a positive impact for the industry going forward.
The stock trades at 15.8/15.5x FY18/19 EPS. Maintain Neutral
Snapshot of volumes for Jan-17
Jan-17
Total volume
Jan-16
YoY (%)
-13.5
Dec-16
330,202
MoM (%)
47.5
FY17-YTD
FY16-YTD
Chg
(%)
1.0
FY17
estimate
6,690,239
YoY
(%)
0.9
Residual
Resi-dual Gr.
Monthly
(%)
Run rate
0.2
580,526
487,088 563,348
5,529,186 5,473,950
2 January 2017
2

Sector Update| 2 January 2017
Automobiles | Update
TVS Motor
CMP: INR 389
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Y/E March
Sales
EBITDA
Adj. PAT
EPS (INR)
EPS Gr. (%)
BV/Sh (INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div. Yield (%)
42.8
9.6
25.6
0.7
32.8
7.9
20.2
0.7
25.3
n
6.4
15.9
n
0.8
TVSL IN
475.1
185/2.7
418 / 256
0/28/18
n
TP: INR462 (Upside 19%)
Buy
In-line, at 207k units (v/s est 211.7k), flat vols YoY
Decline in motorcycles offset by scooters and moped volumes
TVS Motor’s Jan-17 sales were in-line at 207,059 units (v/s est. 211,750 units), flat YoY
(+12% MoM). Domestic volumes were flat YoY while exports declined by 2% YoY(+11%
MoM).
Our FY 17 estimate indicates 10% growth implying a residual growth of 8% or 243k
units/month of run rate.
Scooter volumes grew by 12% YoY (+26% MoM) to 70,049 units (v/s est. 65,000 units).
Motorcycle volumes fell by 28% YoY (+4% MoM) to 60,275 units (est 68.2k units) due
to demonetization impact, especially in the entry level motorcycles whose proportion
is higher in the rural areas.
Mopeds continued its upward momentum with a 30% YoY growth (+9% MoM) to
71,885 units (v/s est. 72.5k units). Strong moped growth is seen on the back of lower
base of FY16 coupled with pent up demand.
3Ws continued their fall with a 33% YoY decline (-10% MoM) to 4,850 units (est 6,000
units), dragged down by weak exports (-30% YoY) while domestic 3Ws too declined by
43% YoY.
Total exports declined by 2% as 3W exports fell by 30% YoY while 2W exports
increased by 4 % YoY.
The stock trades at 25x/17.8x FY18E/FY19E EPS. Maintain Buy.
2016 2017E 2018E
n
112.4 122.7 143.1
7.5
4.3
9.1
24.2
40.8
24.1
23.3
33.7
9.2
5.6
11.9
30.6
49.3
26.4
27.2
27.8
11.5
n
7.3
n
15.4
29.6
61.1
27.9
30.4
n
23.4
n
Snapshot of volumes for Jan-17
Jan-17
Total volume
Motorcycles
Scooters
Mopeds
Three-Wheelers
Total Domestic
Total Exports
207,059
60,275
70,049
71,885
4,850
172,949
34,110
Jan-16
YoY
(%)
chg
Dec-16
184,901
58,189
55,536
65,783
5,393
154,207
30,694
MoM
FY17-YTD FY16-YTD
(%) chg
(%)
chg
FY17
estimate
Gr.
(%)
Resi- Residual FY16 YTD
dual Monthly Monthly
Gr. (%) Run rate Run rate
243,505
85,858
72,516
77,923
7,208
215,352
28,153
245,915
92,242
71,691
76,115
5,867
211,092
34,823
208,485 -0.7
83,374 -27.7
62,552 12.0
55,307 30.0
7,252 -33.1
173,662 -0.4
34,823 -2.0
12.0 2,459,147 2,227,311 10.4 2,946,157 10.0
8.0
3.6
922,421 852,953
8.1 1,094,137 7.6
5.0
26.1
716,906 677,926
5.7
861,937 6.1
7.7
9.3
761,151 599,804 26.9 916,997 24.2 12.3
-10.1
58,669
96,628
-39.3
73,086 -34.1 1.6
12.2 2,110,916 1,838,751 14.8 2,541,621 14.2 11.6
11.1
348,231 388,560 -10.4 404,537 -10.8 -13.3
2 January 2017
3

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Automobiles | Update
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