March figures robust across segments; sector outlook positive

March figures robust across segments; sector outlook positive

Two-wheeler maker Hero Honda Motors Ltd ended the year with a strong volume growth of 17% year-on-year (y-o-y) and 9% sequentially with 400,000 units. For the year, it posted sales of 4.6 million units (up 24% y-o-y). Full year numbers were ahead of the company’s guidance of 4.4 million units. The company is mulling setting up a fourth manufacturing plant with nearly one million units capacity.

Hero Honda’s volumes at 414,638 rose 17% y-o-y in March. On a sequential basis, they increased 8.5%. The company also announced its highest ever dividend of 4,000% (Rs80 per share) as special silver jubilee dividend. In percentage terms, it is the highest payout by an Indian company to date.

For Bajaj Auto Ltd, Discover (97,096 units) and Pulsar (72,804 units) continued to lead growth. Motorcycle volumes jumped 85% y-o-y and 4% sequentially. The company will continue to leverage on these two brands for generating volumes. For FY11, it has set a target of four million units, implying 40% volume growth.

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To regain its market share in the economy segment, the company has reintroduced Platina 125cc with a few cosmetic changes and is offering additional features such as electric start as base version, 5-speed gear box (against 4-speed gear box in earlier version) and all black solid styling. The electric version has been aggressively priced at Rs36,646 ex-showroom Delhi.

During the month, Discover 135cc, which was launched in September, crossed 500,000 sales mark, maintaining a monthly run rate of over 75,000 units.

Maruti Suzuki India Ltd’s domestic volumes rose 8% y-o-y; however, they were down 6% sequentially. The A2 segment, from which the company derives 70% of sales, was down 1.2% y-o-y and 9% sequentially on competition from new launches. Maruti Suzuki has announced that it will expand its capacity at the Manesar plant by 250,000 to 550,000 units over the next two years i.e., by FY12, at a total capital expenditure of Rs1,700 crore. For FY11, Nissan has placed orders for 35,000 units of A-star which it sells under the Pixo badge in the European market. In the current fiscal, Nissan had revised its order from 35,000 units to 55,000 units on favourable outlook in Europe.

Tata Motors Ltd’s medium and heavy commercial vehicle sales continue to post stellar numbers, up 20% sequentially with 20,847 units. This, despite the postponement of a change in emission norms to October, clearly reflecting the strong underlying demand. On the passenger vehicles front, the company was able to maintain flat growth on account of the Indigo range.

Mahindra and Mahindra Ltd’s (M&M) utility vehicles (UV) and tractors continue to generate volumes. M&M continued to grow in the tractors (up 54% y-o-y; 16% sequentially) and UV space (up 170% y-o-y; 14% sequentially), with overall volumes being the highest ever.

Automobile sales across segments continue to be extremely robust. We believe competition will be seen, particularly in the car compact segment and in the sub one-tonner light commercial vehicle segment. Going into FY11, we expect volume growth for the industry to remain robust as strong underlying economic growth will overcome hindrances, such as interest rate hike.

Graphic by Yogesh Kumar/Mint

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