Sector Update| 3 December 2019
Automobiles
Bajaj Auto
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
BJAUT IN
289
914.5 / 12.8
3290 / 2400
-4/4/3
CMP: INR3,160
TP: INR3,169
Neutral
In-line at ~403k units (flat YoY)
Domestic volumes down ~12% YoY, exports up ~14% YoY
BJAUT’s sales were flat YoY at ~403k units (in-line) in Nov’19.
Domestic volumes declined ~12% YoY to 208k units (in-line), while exports
increased ~14% YoY to ~195k units (our estimate: 184k).
2W volumes were flat YoY at 343.4k units. Domestic motorcycle dispatches
declined ~14% to 176.3k units, while motorcycle increased ~18% YoY to 167.1k
units.
3W volumes were flat YoY at ~59.8k units, with domestic volumes up 6.4% at
31.4k units, but exports down 8.1% YoY at 28.3k units.
According to Rakesh Sharma, ED of Bajaj Auto,
“We do not expect to hit sales
of 4 lakh for the month of December because it is a seasonally weak month.
That is the case almost every December, every year because there is a lot of
pullback when the model year changes etc., both on the 3-wheeler side and
domestic motorcycle side but our exports should continue. However,
cumulatively we might be short of 4 lakh (units) in December. The international
performance has been steady and solid and the key driver for this has been
African continent where the economies are doing well, there is no major
dislocation in the currencies opposite USD and political side is steady. So we
have got a great competitive position with every third bike sold over there is of
Bajaj. So the moment economy stabilize, we get a good benefit from that”.
The stock trades at 17.6x/16.6x FY20/21E consol. EPS. Maintain
Neutral.
Financial & Valuation (INR b)
Y/E MARCH
2019 2020E 2021E
Sales
304
302
336
EBITDA
51.9 48.7 53.6
Consol. NP
47.9 51.9 55.0
ConsEPS(INR)
165
179
190
EPS Gr. (%)
9.3
8.5
5.8
BV/Sh. (INR)
753
843
937
RoE (%)
23.4 22.5 21.3
RoCE (%)
21.1 20.5 19.4
Valuation
P/E (x)
19.1 17.6 16.6
P/BV (x)
4.2
3.7
3.4
EV/EBITDA (x)
13.8 14.1 12.2
Snapshot of volumes for November-19
YoY
Company Sales
Bajaj Auto
Motorcycles
Total Two-Wheelers
Three-Wheelers
Domestic
Exports
Nov-19
4,03,223
3,43,446
3,43,446
59,777
2,07,775
1,95,448
MoM
Residual Residual FY20 YTD
Growth Monthly Monthly
YoY (%)
MoM
FY20
Nov-18
Oct-19
FY20 YTD FY19 YTD (%) chg
Gr. (%)
(%)
Run rate Run rate
chg
(%) chg
estimate
4,06,930
3,46,544
3,46,544
60,386
2,34,818
1,72,112
-0.9
-0.9
-0.9
-1.0
-11.5
13.6
4,63,208
3,98,913
3,98,913
64,295
2,78,776
1,84,432
-12.9
-13.9
-13.9
-7.0
-25.5
6.0
32,87,196
28,09,226
28,09,226
4,77,970
18,12,784
14,74,412
34,79,714
29,36,035
29,36,035
5,43,679
20,48,070
14,31,644
-5.5
-4.3
-4.3
-12.1
-11.5
3.0
47,39,420
40,16,753
40,16,753
7,22,668
25,45,594
21,93,826
-5.6
-5.2
-5.2
-7.7
-13.4
5.5
-5.7
-7.2
-7.2
2.4
-17.9
11.2
3,63,056
3,01,882
3,01,882
61,174
1,83,203
1,79,854
4,10,900
3,51,153
3,51,153
59,746
2,26,598
1,84,302
Jinesh Gandhi - Research analyst
(Jinesh@MotilalOswal.com); +91 22 6129 1524
Aanshul Agarawal - Research analyst
(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
Hero MotoCorp
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
HMCL IN
200
480.5 / 6.7
3383 / 2228
-13/-14/-34
CMP: INR2,406
TP: INR2,707 (+13%)
In-line at 516.8k (-16% YoY)
Weakness continues post festival season
Neutral
Financials Snapshot (INR b)
Y/E MARCH
2019 2020E
Sales
336.5 298.7
EBITDA
49.3 42.8
NP
33.8 30.7
Adj. EPS (INR) 169.5 153.6
EPS Gr. (%)
-8.5 -9.4
BV/Sh. (INR)
643.7 687.4
RoE (%)
27.5 23.1
RoCE (%)
26.4 22.3
Valuations
P/E (x)
14.2 15.7
P/BV (x)
3.7
3.5
EV/EBITDA (x)
8.5
9.4
2021E
335.1
47.1
34.8
174.0
13.3
746.9
24.3
23.4
13.8
3.2
8.4
HMCL’s volumes declined ~16% YoY to 516.8 units (in-line) in Nov’19.
The company had reported strong retails in the previous month and thereafter
lowest inventory in the past two years in Nov’19 to strike a balance therein
ahead of BS-VI transition.
We estimate volumes to decline by ~13% in FY20, implying a residual decline of
2.1%. We see a downside risk to our volumes estimate, particularly due to the
impact from BSVI transition.
HMCL trades at 15.7/13.8x FY20/21E EPS. Maintain
Neutral.
Snapshot of volumes for November-19
YoY
Company Sales
Hero MotoCorp
MoM
Residual Residual FY20 YTD
Growth Monthly Monthly
YoY (%)
MoM
FY20
Nov-19 Nov-18
Oct-19
FY20 YTD FY19 YTD (%) chg
Gr. (%)
(%) Run rate Run rate
chg
(%) chg
estimate
5,16,775 6,11,816 -15.5 5,99,248 -13.8 46,50,363 55,85,480 -16.7 68,38,606 -12.6
-2.1 5,47,061 5,81,295
3 December 2019
2
 Motilal Oswal Financial Services
Automobiles | Update
TVS Motor
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
TVSL IN
475
Domestic vols down ~26% YoY, exports up ~27% YoY
222.1 / 3.1
594 / 340
TVSL’s wholesales of 266.6k units missed our estimate of 291k in Nov’19.
-2/-7/-29
Domestic volumes declined ~26% YoY, while exports (28% of volumes) increased
CMP: INR 468
TP: INR434 (-7%)
Below estimate at 266.6k units (-17% YoY)
Neutral
Financials Snapshot (INR b)
Y/E MARCH
2019 2020E 2021E
Sales
182.1 174.2 199.2
EBITDA
14.3 14.9 17.9
Adj. PAT
6.7
6.8
8.7
EPS (INR)
14.1 14.2 18.3
EPS Gr. (%)
1.1
0.9 28.7
BV/Sh (INR)
70.5 81.4 94.9
RoE (%)
21.5 18.7 20.8
RoCE (%)
22.4 18.8 21.8
Valuations
P/E (x)
33.1 32.9 25.5
P/BV (x)
6.6
5.7
4.9
EV/EBITDA (x)
16.7 15.9 13.0
27% YoY.
Motorcycle volumes declined ~12% YoY to ~106k units (our estimate: 115k).
Scooter volumes were down ~25% YoY at 84.2k units (our estimate: 105k).
Moped dispatches declined ~22% YoY to 59.2k units (our estimate: 56k).
3W volumes increased ~34% YoY, led by healthy export sales.
The stock trades at 32.9/25.5x FY20/21E EPS. Maintain
Neutral.
Snapshot of volumes for November-19
YoY
Company Sales
TVS Motor
Motorcycles
Scooters
Mopeds
Three-Wheelers
Total Domestic
Total Exports
Nov-19
2,66,582
1,05,963
84,169
59,218
17,232
1,92,522
74,060
MoM
YoY (%)
MoM
FY20
Nov-18
Oct-19
FY20 YTD FY19 YTD (%) chg
chg
(%) chg
estimate
3,19,965 -16.7 3,23,368 -17.6 23,98,977 27,35,040 -12.3 35,58,039
1,19,883 -11.6 1,25,660 -15.7 9,90,328 10,77,218 -8.1 14,41,355
1,11,763 -24.7 1,21,437 -30.7 8,33,296 9,38,924 -11.2 12,76,448
75,496 -21.6 61,064 -3.0 4,59,996 6,16,689 -25.4 6,67,387
12,823 34.4 15,207 13.3 1,15,357 1,02,209 12.9 1,72,848
2,61,489 -26.4 2,54,029 -24.2 18,35,529 22,29,189 -17.7 27,00,556
58,476 26.7 69,339
6.8 5,63,448 5,05,851 11.4 8,57,483
Gr. (%)
-9.1
-7.6
-1.9
-25.6
10.5
-14.3
12.6
Residual Residual FY20 YTD
Growth Monthly Monthly
(%) Run rate Run rate
-1.7 2,89,765 2,99,872
-6.7 1,12,757 1,23,791
22.4 1,10,788 1,04,162
-26.0 51,848 57,500
6.0
14,373 14,420
-6.3 2,16,257 2,29,441
14.9
73,509 70,431
3 December 2019
3
 Motilal Oswal Financial Services
Automobiles | Update
Ashok Leyland
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
AL IN
2,927
233.7 / 3.3
113 / 57
3/-16/-42
CMP: INR80
TP: INR95 (+19%)
Above estimate at 10.2k units
Sales down ~32% YoY in MHCV and 4.4% YoY in LCV
Buy
Financials Snapshot (INR b)
Y/E MARCH
2019 2020E 2021E
Sales
290.5 187.1 233.7
EBITDA
31.4 12.9 20.9
NP
20.3
4.5 10.2
Adj. EPS (INR)
6.9
1.5
3.5
EPS Gr. (%)
16.4 -77.8 126.8
BV/Sh. (INR)
28.4 27.0 27.8
RoE (%)
26.0
5.5 12.7
RoCE (%)
23.2
5.4 11.4
Valuations
P/E (x)
11.5 51.9 22.9
P/BV (x)
2.8
2.9
2.9
EV/EBITDA (x)
7.2 19.0 11.6
Wholesale dispatches came in above our estimate at 10.2k units (-31.6% YoY) in
Nov’19.
M&HCV volumes, which accounted for 59% of total volumes in the month,
declined ~32% YoY (-31% MoM) to ~6k units (our estimate: ~4.3k).
LCVs declined 4.4% YoY to 4.2k units (our estimate: 4.5k).
The stock trades at 51.9/22.9x FY20/21E EPS and at 2.8/2.8x FY20/21E
EV/EBITDA. Maintain
Buy.
Snapshot of volumes for November-19
YoY
Company Sales
Ashok Leyland
CV (ex LCV)
LCV
Nov-19 Nov-18
10,175
5,966
4,209
13,119
8,716
4,403
MoM
YoY (%)
MoM
Oct-19
FY20 YTD FY19 YTD (%) chg
chg
(%) chg
-22.4 9,074
12.1 87,795 1,22,350 -28.2
-31.6 4,565
30.7 54,065 87,545 -38.2
-4.4
4,509
-6.7
33,730 34,805
-3
Residual
Growth
FY20
Gr. (%)
(%)
estimate
1,34,403 -31.9
-37.9
83,821 -41.3
-46.2
50,582
-7.2
-14.5
Residual FY20 YTD
Monthly Monthly
Run rate Run rate
11,652 10,974
7,439
6,758
4,213
4,216
3 December 2019
4
 Motilal Oswal Financial Services
Automobiles | Update
Escorts
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
CMP: INR663
In-line at 7.6k units
ESC IN
123
81.2 / 1.1
834 / 423
-1/8/-19
TP: INR700(+6%)
Neutral
Domestic sales down ~3% YoY
Financials Snapshot(INR b)
Y/E MARCH
2019 2020E 2021E
Net Sales
62.6 60.6 65.3
EBITDA
7.2
6.6
7.6
NP
4.7
4.7
5.3
Adj. EPS (INR)
53.2 52.7 59.8
EPS Gr. (%)
34.7
-1.0 13.4
BV/Sh. (INR)
300.8 348.7 402.8
RoE (%)
19.3 16.2 15.9
RoCE (%)
18.8 20.8 21.4
Valuations
P/E (x)
12.5 12.6 11.1
P/BV (x)
2.2
1.9
1.6
EV/EBITDA (x)
8.2
8.3
7.0
Tractor dispatches declined ~5% YoY to 7.6k units (in-line) in Nov’19.
Domestic sales were down by-3.4% YoY at 7.4k units.
Exports declined to ~28% YoY to 263 units.
The stock trades at 12.6x/11.1x FY20/21E EPS. Maintain
Neutral.
Snapshot of volumes for November-19
YOY
Eicher Motors
Escorts
Domestic
Exports
Nov-19
7,642
7,379
263
Residual Residual FY20 YTD
Growth Monthly Monthly
YoY (%)
MoM
FY20 YoY (%)
(%) Run rate Run rate
Nov-18
Oct-19
FY20 YTD FY19 YTD (%) chg
chg
(%) chg
estimate chg
8,005
-4.5 13,353 -42.8 61,796 66,678 -7.3
92,314
-4.3
2.6
7,630
7,725
7,641
-3.4 13,034 -43.4 59,324 65,000 -8.7
15,199
26.9
-16.8 -11,031 7,416
364
-27.7
319
-17.6 2,472
1,678
47
989
-31.3 520.5
-371
309
MoM
3 December 2019
5
 Motilal Oswal Financial Services
Automobiles | Update
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UNDER REVIEW
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Expected return (over 12-month)
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Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
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Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be
suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient.
Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult
its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-
investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The
Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The
Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from time to time, effect or have effected an own
account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in
this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already available in
publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information
and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or
resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction.
The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm,
not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The person
accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such misuse
and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website
www.motilaloswal.com.
CIN No.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.
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 Corporate
Agent: CA0579 ;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth
Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products
and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of
MOFSL. Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is
subject to market risk, read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL 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.
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