MotoGazeOctober, 2011

October 12, 2011 Sector View

Equal weight

Festive season brightens volumes

Gr. YoY(%) 26.7 18.4 14.7 -20.8 21.8 25.5 -17.2

Volume performance
Company Hero Motocorp Bajaj Auto TVS Motors Maruti Suzuki Tata Motors Mahindra and Mahindra Ashok Leyland

Key players & industry volume growth -Sep11(%)

Industry HH BAL TVS -20.8 Maruti Hyundai TML M&M -17.2 ALL 9.2 9.1 9.1 14.7 10.7 YoY gr -6.4 12.4 13.3 21.8 22.9 17.1 18.8 25.5 MoM gr 18.4 20.4 26.7

The commencement of the festive season saw the automotive industry shift gears and post robust volume numbers. However, demand remains under pressure as the outlook remains cautious on account of multiple macro headwinds. The Society of Indian Automobile Manufacturers (SIAM) has significantly lowered its passenger car growth forecast for FY12 to 2-4% from its earlier estimate of 10-12% due to lower production by the market leader Maruti Suzuki due to labour issues and also on account of higher lending rates. The industry registered figures of ~1.83 million units in September 2011, up 9.2% on an MoM basis. The demand remained buoyant in the two-wheeler segment driven by robust demand from Tier-II cities and rural areas coupled with lesser dependency on vehicle financing (up 26.5% YoY). The volume growth of the industry in September 2011 has been 21.9% on a YoY basis. Passenger car (PV) segment grew tepidly at 3.1% YoY but a robust 21.3% YoY (ex-Maruti). The commercial vehicle (CV) segment continued its robust growth resulting in a volume increase of 22% YoY driven by the LCV space, up 40.8% YoY.

Volumes perk up but outlook remains cautious

New festive launches help revive consumer sentiment

The early start of the festive season due to Navratri beginning in September vis--vis October last year bundled with promotional schemes and fresh product launches boosted volumes for the month. Moreover, pre-season dealer stocking was higher during the month with impending festivities. The companies endeavoured to lure back customers with an array of new launches notable among which were Hondas Brio, Nissans Sunny and Mahindra XUV500. Also, Hyundai Eon, which is expected to be launched in October, will help boost further consumer sentiment. In the two-wheeler space, the newly launched Bajaj Boxer 150 cc received a good response selling ~20,000 units during the month.

Source: SIAM

Key players & industry volume growth YTD (%)

Industry HH BAL TVS -10.6 Hyundai TML M&M -6.7 ALL Maruti 4.5 5.1 29.0 17.0 16.5 16.5 22.0

Unrelenting macro headwinds remain an overhang on volumes

The cost of ownership continues to remain high with fuel and commodity prices holding up and high interest rate hurting buyer sentiment, especially in the passenger vehicle space. Commodities have shown mixed signs with rubber showing signs of correction while aluminium and steel witnessed stiffness. According to estimates, global commodity prices may remain at similar levels or soften slightly in the near to medium term as the global growth outlook seems to have tapered off from earlier estimates. Also, another interest rate hike of 25 bps during the month (12th hike in 18 months) added to the waning consumer sentiments. The petrol price hike of | 3.14/litre during September added to the woes. Its impact is evident in the passenger vehicle category (up 4.8 % YTD).

Industry outlook
We maintain our optimistic outlook towards volume growth in the sector. We expect an industry wide volume growth of ~13% for FY12E. On an index performance basis, the BSE Auto index has outperformed the BSE Sensex with YoY return of -14.7% as compared to -18.2% during the same period. The demand, which remained buoyant in FY11, has shown signs of slowing down due to fuel price hikes and higher interest rates. Among our ICICIdirect.com auto coverage, we remain bullish on frontline OEM stocks like Tata Motors. In the ancillary coverage, we find favourable valuation in Exide Industries.

Analysts name
Karan Mittal karan.mittal@icicisecurities.com Nishant Vass nishant.vass@icicisecurities.com Aman Daga aman.daga@icicisecuritites.com

ICICI Securities Ltd. | Retail Equity Research

News & views

Hyundai Motor Group's small car, the Eon, will be launched on October 13 at Gurgaon and will be available in five or six variants. The bookings for the car started on October 1 and will come at a starting price of ~| 2.6 lakh Toyota Motor Corp has announced that the Indian-made Etios sedan will be exported to South Africa from March. It is the first time the Japanese automaker is selling its made-in-India cars elsewhere. The models for South Africa will be designed especially for that market Czech carmaker Skoda, a part of auto conglomerate Volkswagen, has started production of its yet-to-be-launched entry level sedan Rapid from the group's Chakan plant, near Pune. Skoda Rapid will be entirely manufactured in India. It will be positioned at the entry level of the country's mid-sized sedan segment Maruti Suzuki, which appeared to have put its labour problems behind after workers resumed duty on terms widely perceived to be favourable to the management, found itself facing renewed unrest. Workers at its troubled Manesar car plant went on a flash strike, in which no notice was served on the management, virtually seizing the premises in protest of the management's decision not to allow 1,100 casual workers to enter the factory German auto major BMW, which entered the domestic market early this year with six models in the two-wheeler segment, plans to launch under-1,000-cc bikes by January. BMW sells six 1000 cc plus models in the country - the R1200R, S1000RR, R1200GS, K1300, K1600GTL and the HP2. These models are priced at | 18 lakh onwards

ICICI Securities Ltd. | Retail Equity Research

Page 2

Twothree wheeler industry

The two-wheeler industry sustained its volume flight and clocked robust 19.2% YTD growth. The segment witnessed record volumes for major players like Hero MotoCorp and Bajaj Auto and continues to remain least affected by higher cost of financing. Market leader Hero MotoCorp registered record volumes of 549,625 (up 26.7% YoY) while Bajaj Auto witnessed robust 18.4% YoY growth at 417,686 units. Scooter segment continued its northward trajectory recording a robust 24.7% YTD growth. Honda Motorcycle & Scooter India crossed the one lakh sales figure in the domestic scooter segment for the first time ever clocking total scooter sales of 109,536. Strong demand from rural segment and Tier II cities are driving volume growth in the segment. However, in the coming few months, higher base effect can moderate volume growth.

Market share movement

According to data released by the Society of Indian Automobile Manufacturers (SIAM), the domestic market share of two and threewheeler players is as below for September 2011.
Exhibit 1: Domestic market share movement in two-wheelers
50 45 40 35 30 (%) 25 20 15 10 5 0 Bajaj Auto Hero Motocorp TVS motor Others 21.4 19.6 19.8 15.1 14.6 14.7 19.8 19.9 20.0 43.7 45.9 45.4 Sep-10 Aug-11 Sep-11

Source: SIAM

Exhibit 2: Domestic market share movement in three-wheelers

11.0 10.4 10.5 11.5 12.9 13.3 37.8 37.8 37.0 39.7 38.9 39.2 0 5 10 15 20 (%) 25 30 35 40 45

Others

Sep-11

Aug-11

Sep-10

M&M

Piaggio

Bajaj Auto

Source: SIAM

ICICI Securities Ltd. | Retail Equity Research

Page 3

Exhibit 3: Domestic market share movement in motorcycles

60 50 40 (%) 30 20 10 0 Bajaj Auto Hero Motocorp TVS motor Honda 7.2 6.4 6.6 7.7 7.0 6.9 27.8 25.7 26.0 53.4 56.2 55.7 Sep-10 Aug-11 Sep-11

Source: SIAM

Exhibit 4: Domestic market share movement in scooter /scooterette

50 45 40 35 30 (%) 25 20 15 10 5 0 Hero Motocorp TVS Motors Honda 15.6 16.9 16.5 20.6 21.5 21.8 Sep-10 Aug-11 Sep-11 45.8 43.5 44.0

Source: SIAM

ICICI Securities Ltd. | Retail Equity Research

Page 4

Exhibit 5: Market share movement in executive motorcycle segment*

80

Hero MotoCorp lost market share to the tune of 111 bps on a sequential basis to 66.0%z. Bajaj Autos market share remained flat at 24.9% (down 28 bps MoM). TVS
(%)

70 60 50 40 30 20 10 0 Feb-10 Apr-10 Dec-09 Jul-10 Nov-09 Jun-10 Aug-10 Mar-10 May-10 Jan-10

64.7

67.1

66.0

extended its market share gains for third successive month at 9.1% (up 138 bps MoM)

25.4 9.9

25.124.9 7.7 9.1

Sep-10

Feb-11

Apr-11

Dec-10

Nov-10

Mar-11

Bajaj Auto

Hero Motocorp

TVS

Source: SIAM * considering only top three 2-wheeler OEMs

Exhibit 6: Market share movement in greater than 125 cc segment

Bajaj Auto, in its strongest segment, has witnessed a market share gain of 196 bps MoM while Hero MotoCorp saw a decline of 24 bps on an MoM basis
80 70 60 50 (%) 40 30 20 10 0 Sep-09 Apr-10 Feb-10 Oct-09 Dec-09 Jun-10 Jul-10 Nov-09 Aug-10 Jan-10 Mar-10 May-10 12.4 10.9 Sep-10 Feb-11 Apr-11 Oct-10 Dec-10 Jun-11 Nov-10 Jul-11 Jan-11 Mar-11 May-11 13.2 13.0 76.7 75.1 77.0

May-11

11.7 10.0 Aug-11 Sep-11

Bajaj Auto (LHS)

Hero Motocorp (RHS)

TVS

Source: SIAM * considering only top three vehicle two-wheeler OEMs

ICICI Securities Ltd. | Retail Equity Research

Page 5

Aug-11

Sep-11

Oct-10

Jun-11

Jan-11

Jul-11

Hero MotoCorp: sales volumes

516 517 506 513 501 500 421 500 (000's) 400 300 200 100 0 Apr '11 Sept '10 Feb '11 May'11 Mar '11 Nov '10 Oct '10 Jan '11 Aug'11 Dec'10 Sep'11 Jun'11 Jul'11 434 467 472 491 504 600 550

Hero MotoCorp (HERHON)

w

Hero MotoCorp, market leader in the two-wheeler segment, clocked record monthly sales figure of ~5.5 lakh units The companys sales are expected to be robust during the festival season but we expect market share to come under some pressure due to the launches from competitors. Moreover, higher base effect from next month could weigh on the growth rate The company reported volumes of 549,625 units posting 26.7% YoY and 9.1% MoM growth. The company is poised to achieve its target of surpassing sales of over 6 million units in FY12. Thus far, its performance is on track with YTD sales up 22% YoY The scooter segment saw a volume rise of ~38% YoY but fell 18.8% on an MoM basis clocking 38,248 units. The company plans to enhance its focus on the scooter division with capacity expansion of ~65% in FY12 to touch ~57,500 units per month
Sep-11 549,625 Sep-10 433,641 %chg 26.7 Aug-11 503,654 %chg 9.1 YTD12 3,074,593 YTD11 %chg 2,519,983 22.0

Source: SIAM, ICICIdirect.com Research

Exhibit 7: Volume performance (in units)

Segment Total Sales

Bajaj Auto : Two-wheeler sales volumes

400 350 300 250 200 150 100 50 0 371 330 322 318 323 315 276 287 265 274 318 338

Source: Company, ICICIdirect.com Research

Bajaj Auto (BAAUTO)

Bajaj Auto registered sturdy volume numbers supported by export growth (up 39.2% YoY). On the domestic front, its market share improved to 26% in the motorcycle segment as domestic sales picked up ~12.8% on an MoM basis Total volumes for the month were at 417,686 units reflecting 18.4% YoY growth. In the two-wheeler space, the Pulsar and Discover brands (accounting for ~65% of total sales) continued to be the volume driver. Bajaj recently launched its new offering the Bajaj Boxer 150 cc, which is aggressively priced similar to a 100 cc bike. During the month, the company sold ~20,000 units of Boxer and is confident of maintaining a similar run rate, going ahead. The domestic contribution to motorcycle sales rose ~190 bps MoM to 68.9% in September 2011 The three-wheeler segment for Bajaj Auto stayed on its growth path witnessing 21.5% YoY growth at 46,478 units. Exports contribution in September remained flattish on a sequential basis at 56.9% from 59.8% in August Overall exports advanced to 141,913 units, a jump of ~39.2% YoY. The export contribution to total sales in September 2011 declined to 34% from 36.1% in August as domestic sales witnessed expansion
Sep-11 371,208 46,478 417,686 141,913 34.0 Sep-10 314,515 38,254 352,769 101,960 28.9 %chg 18.0 21.5 18.4 39.2 Aug-11 338,054 44,685 382,739 138,225 36.1 %chg YTD12 YTD11 9.8 1,990,408 1,711,863 4.0 266,544 216,994 9.1 2,256,952 1,928,884 2.7 851,498 631,231 37.7 32.7 %chg 16.3 22.8 17.0 34.9 -

(000's)

244

Mar '11

May '11

Dec '10

Apr '11

Jun'11

Jul'11

Sept '10

Aug'11

Oct '10

Jan'11

Feb'11

Source: SIAM, ICICIdirect.com Research

Bajaj Auto : Three-wheeler sales volumes

45.1 41.0 40.2 45 (000's) 40 35 30 25 20 Sept '10 Apr '11 Oct '10 Dec'10 Mar '11 Nov '10 May '11 Aug'11 Sep'11 Feb'11 Jan'11 Jun'11 Jul'11 40.9 43.8 45.6 50 38.3 38.0 44.7 46.5

Nov '10

Sep'11

34.2

33.1

33.3

Source: SIAM, ICICIdirect.com Research

Exhibit 8: Volume performance (in units)

Segment Motorcycles 3-wheelers Total 2&3 wheelers* Exports(incl. in above) Exports as % of sales

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd. | Retail Equity Research

Page 6

TVS Motors : Scooter sales volumes

60 50 (000's) 40 30 20 10 0 Apr '11 Sept '10 Feb '11 Jan '11 Oct '10 Nov '10 May '11 Mar '11 Dec '10 Aug'11 Sep'11 Jun'11 Jul'11 43 45 36 42 41 40 43 35 38 44 56 50 52

TVS Motors (TVSSUZ)

TVS Motors clocked strong sales across its segments viz. motorcycles, scooters and mopeds Total sales volumes came in at 215,690 units, which reflected a 14.7% YoY and 10.7% MoM growth. Motorcycle volumes were at a record 90,848 units, an increase of 11.6% on a YoY basis The scooter segment crossed the 50,000 mark, registering an MoM rise of 6.9% and YoY jump of 29.7% at 55,879 units. In the two-wheeler space, the automatic scooter space continues to witness high traction with an overall 24.7% YTD volume growth for the segment The mopeds segment performed well with a 14.3% YoY jump to 68,963 units. Robust retail sales in the southern region from the rural segment remain the key driver for the category The export segment marched ahead with 34.1% YoY growth clocking 25,973 units. The contribution of exports continues to remain higher with YTD contribution at 14.3%, up from 11.5% in FY11
Sep-11 90,848 55,879 68,963 215,690 25,973 12.0 Sep-10 81,381 43,086 60,316 188,005 19,365 10.3 %chg 11.6 29.7 14.3 14.7 34.1 Aug-11 77,726 52,253 64,919 194,898 29,984 15.4 %chg 16.9 6.9 6.2 10.7 -13.4 YTD12 456,125 275,655 403,438 1,135,218 162,109 14.3 YTD11 409,364 219,842 329,783 974,261 112,437 11.5 %chg 11.4 25.4 22.3 16.5 44.2

Source: SIAM, ICICIdirect.com Research

TVS Motors: Motorcycles & mopeds volumes

149 147 148 142 138 127 118 121 129 150 (000's) 120 90 60 30 0 Feb '11 Apr '11 Sept '10 Oct '10 Jan '11 Nov '10 Dec '10 May '11 Mar '11 Aug'11 Sep'11 Jun'11 Jul'11 133 139 143 160

Exhibit 9: Volume performance (in units)

Segment Motorcycles Scooters Mopeds Total Sales Exports(incl. in above) Exports as % of sales

Source: SIAM, ICICIdirect.com Research

Source: Company, SIAM* TVS Jive launched nationwide in March10, TVS Wego test launched in April10. The numbers of 3-wheelers are included in total volumes

ICICI Securities Ltd. | Retail Equity Research

Page 7

Exhibit 10: Volume trends in executive segment

330 280 (000's) 230 180 130 80 Apr-10 Sep-10 Feb-10 Apr-11 Dec-09 Nov-09 Dec-10 Nov-10 Mar-10 May-10 Aug-10 Mar-11 May-11 Aug-11 Sep-11
190 170 150 110 90 70 50 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 (000's) 130

Hero Motocorp continued to gain traction in the executive segment

150 140 130 (000's) 120 110 100 90 80

Jun-10

Feb-11

Oct-10

Jul-10

Bajaj Auto (LHS)

Hero Motocorp (RHS)

Source: SIAM Volumes have been rebased with Apr-09 as base as base with 100

Exhibit 11: Volume trends in premium segment

210 190 170 (000's) 150 130 110 90 70 50 Bajaj Auto witnessed stronger growth than its peers

Bajaj Auto (LHS)

Hero Motocorp (RHS)

Source: SIAM Volumes have been rebased with Apr-09 as base as base with 100

ICICI Securities Ltd. | Retail Equity Research

Jun-11

Jan-10

Jan-11

Jul-11

Page 8

Four-wheeler industry
Passenger vehicle volumes received a boost on account of pre festive stocking and a host of new product launches bundled with promotional offers. The segment recorded a growth of 21.3% YoY (ex-Maruti). Market leader Maruti could not entirely capitalise on the festive season demand due to labour issues at its Manesar plant which resulted in ~20,000 units. SIAM has lowered its passenger car growth forecast for FY12 to 2-4% from its earlier estimate of 10-12%. The commercial vehicles segment witnessed growth of 22.0% YoY, which was primarily driven by the LCV segment (up 40.8% YoY). The M&HCV segment grew at a modest 3.0% YoY as the segment continues to face challenges on the interest rates front and going ahead with rates peaking out H2FY12 is expected to be better.

Market share movement

According to SIAM, the domestic market share for passenger vehicles (PV) and commercial vehicles (CVs) in September 2011 has been as follows.
Exhibit 12: Domestic market share movement in passenger vehicles
Others GM M&M Tata motors Hyundai Maruti 0 5 10 15 20 25 30 35 4.6 4.6 4.4 7.2 9.4 9.2 12.6 12.3 14.8 15.2 14.9 14.7 39.6 40.3 40 44.4 45 50 14.5 18.6 18.7 Sep-10 Aug-11 Sep-11

(%)

Source: SIAM

Exhibit 13: Domestic market share movement in commercial vehicles

70 60 50 (%) 40 30 20 10 0 ALL M&M Tata Motors Others 13.2 16.7 17.7 17.5 9.9 10.0 13.2 13.9 13.9 Sep-10 Aug-11 Sep-11

56.9 58.6 58.7

Source: SIAM

ICICI Securities Ltd. | Retail Equity Research

Page 9

The A2 segment remains driven by Maruti Suzuki and Hyundai. Maruti has lost market share in the segment due to production disruption at the Manesar plant due to labour strikes and is currently at 39.3%

Exhibit 14: Market share movement in A2 segment

60 50 40 (%) 30 20 10 0 Apr-10 Sep-10 Apr-11 Mar-10 Mar-11 Aug-10 May-10 May-11 Aug-11 Nov-09 Nov-10 Dec-09 Dec-10 Sep-11 42.1 41.6
Oct-11

52.6 45.2 39.3 30.6 29.130.7

Feb-10

Feb-11

Oct-10

Jul-10

Jun-10

Hyundai

Maruti

Source: SIAM, Top two PV OEMs considered

The growth in the CV segment has been considerable, (up 22% YoY) driven primarily by robust growth in the LCV space (up 40.8% YoY)

Exhibit 15: Segmental share in CVs

70 60 50 (%) 40 30 20 10 0 Sep-10 Nov-09 Mar-10 May-10 Nov-10 Mar-11 May-11 Sep-11 Jul-10 Jan-10 Jan-11 Jul-11
Jun-11 Aug-11

Jun-11

Jan-10

Jan-11

Jul-11

58.457.9 49.7

50.3

M&HCV

LCV

Source: SIAM

Exhibit 16: Auto raw material index

The in-house raw material index reflects the combination of various input materials (steel, rubber, aluminium, plastics) for OEMs, which have been rebased with February 2009 as the base year to 100. The chart shows the increasing trend in raw material prices causing concern for the industry
200 180 160 140 120 100 80 Apr-09 Apr-10 Feb-09 Feb-10 Jun-09 Aug-09 Jun-10 Aug-10 Dec-09 Dec-10 Feb-11 Apr-11 Oct-09 Oct-10

RM Auto Index

Source: Bloomberg,Reuters,Company,ICICIdirect.com Research

ICICI Securities Ltd. | Retail Equity Research

Page 10

Maruti Suzuki India: sales volumes

119 113 108 105 99 97 104 120 100 (000's) 80 60 40 20 0 Apr'11 Sept '10 Aug '10 Oct '10 Dec '10 M ar'11 Nov '10 M ay'11 Jan '11 Aug'11 Sep'11 Feb'11 Jun'11 Jul'11 110 112 122

Maruti Suzuki India (MARUTI)

91 80 75 86

Maruti Suzuki India (MSIL) witnessed volume de-growth primarily due to the 33 day labour unrest at the Manesar plant and demand slowdown in the domestic market. The volumes came in at 85,565 units (down 20.8% YoY) Domestic sales remained flattish on a sequential basis at 78,816 units (up 2.2% MoM but down 17.2% YoY). Marutis domestic market share in the PV segment slipped to 39.6% from 44.4% in September 2010. SIAM has slashed down its growth forecasts for passenger cars to 2-4% from the earlier 10-12% in FY12E. In the near future, the festive season would improve demand but volume would get ramped up only if the ongoing labour issues are resolved. We expect the sales volumes to remain under pressure until the interest rate cycle peaks out During the month, the workers month long strike ended. It started on August 29 and ended on October 1. The workers have joined duty by signing the good conduct bond as demanded by the management. The 18 trainees, against whom disciplinary action had been taken, have been taken back. However, 44 regular workers who have been suspended have still been kept outside. The combined volume loss from the strike and prior slow tactics in July 2011 are estimated to be in excess of 20,000 units The bread and butter segment for Maruti i.e. the A2 segment (Alto, Swift, Wagon-R, Zen, A-star, Ritz) sold 55,746 units, a growth of 6.9% MoM. It remains the most interest rate sensitive segment in the PV space. Also, the C segment (Omni, Versa and Eeco) performed sluggishly at 11,737 units (down 6.1% MoM) The high yielding A3 segment saw volumes slide to 9,607 units (down 1.5% MoM and 8.8% YoY)

Source: SIAM, ICICIdirect.com Research

Maruti Suzuki India: Export performance

16 14 12.9 12 (000's) 10 8 6 4
Sept '10 Oct '10 Nov '10 Jan '11 Feb'1 1 Apr'1 1 M ay'11 Jul'11 D ec '10 M ar'11 Aug'1 1 Jun'1 1

14.4 11.4 10.1 9.8 9.3 10.1 11.5

10.010.6 10.3

8.8

100 80 60 40 20 0 6.7 -20 -40 -60

Sep'1 1

YoY grow th (%)

Source: SIAM, ICICIdirect.com Research

Tata Motors: CVs sales volume

51.7 46.9 45.6 47.0

60
44.8 45.4 39.8 39.7 38.9

55.4

(000's)

40 30 20 10 0

39.9

42.6

50

43.7

Exhibit 17: Volume performance (in units)

Segment M800 Omni, Eeco,Versa Alto, Wagon-R, Zen, Swift,Ritz SX4, Swift & Dzire Kizashi Total Passengers Gypsy, Vitara Total Domestic Exports Total Sales Exports as % of sales Sep-11 1,300 11,737 55,746 9,607 14 78,404 412 78,816 6,749 85,565 7.9 Sep-10 1,608 13,822 68,921 10,531 0 94,882 266 95,148 12,858 108,006 11.9 %chg -19.2 -15.1 -19.1 -8.8 -17.4 54.9 -17.2 -47.5 -20.8 Aug-11 %chg 1,400 -7.1 12,500 -6.1 52,139 6.9 9,749 -1.5 8 75,796 3.4 1,290 -68.1 77,086 2.2 14,356 -53.0 91,442 -6.4 15.7 YTD12 10,959 78,365 324,456 55,292 171 469,243 3,846 473,089 60,744 533,833 11.4 YTD11 %chg 12,113 -9.5 75,117 4.3 369,466 -12.2 60,320 -8.3 517,016 -9.2 3,807 1.0 520,823 -9.2 76,155 -20.2 596,978 -10.6 12.8

Nov '10

Sept '10

May'11

Aug'11

Oct' 10

Dec'10

Jan'11

Mar'11

Apr'11

Jun'11

Jul'11

Source: SIAM, ICICIdirect.com Research

Tata Motors: PVs sales volume

30.6 28.0

35
24.9 25.1

32.2

27.1 17.9 17.1

Sep'11

Feb'11

24.5

20.5

(000's)

15.7

20 15 10 5 0

19.7

25

22.7

30

Source: Company, SIAM. * Alto-K10 launched in Aug 10 and EECO in January 2010.

Tata Motors (TELCO)

Tata Motors witnessed healthy growth in the passenger vehicle segment with volumes up ~58% YoY. Nano and Indigo volumes improved sequentially amid rising interest rates at 2,906 and 7,393 units, respectively. Total sales for the company stood at 78,783 units (up 21.8% YoY) propelled by festive season demand

Nov '10

Mar'11

Jun'11

Jul'11

Sept'10

Aug'11

Oct'10

Dec'10

Jan'11

Apr'11

Source: SIAM, ICICIdirect.com Research

ICICI Securities Ltd. | Retail Equity Research

May'11

Sep'11

Feb'11

Page 11

Jaguar Land Rover sales

100 (% share of total volumes) 23.0 21.4 80 60 40 20 0 Aug '10 Sept '10 Oct '10 Nov '10 Dec '10 Jan '11 Feb '11 Mar '11 Apr '11 May'11 Jun'11 Jul'11 Aug'11 16.2 19.5 18.8 20.4 21.7 24.1 19.5 22.3 20.4 19.8 21.2 30

At a segmental level, the M&HCV segment clocked 7.9% YoY and 10.7% MoM growth. The LCV segment posted an outstanding set of numbers, up 48.3% YoY and 9.7% MoM at 32,118 units Passenger car volumes climbed 58.6% YoY and 1.4% MoM. The UV segment witnessed a jump of 56.1% YoY and 56.2% MoM. The festive season has seen a demand pick-up in the PV space and is likely to remain at similar levels in the coming months The sales of the Indica and Indigo range of vehicles soared during the month. Indica sales were up ~43% MoM at 10,282 units while the sales of the Indigo range of vehicles grew ~53% sequentially at 7,793 units. Similarly, Nano sales jumped ~144% MoM to 2,936 units on small base. Nano sales had started to flounder and reached its lowest level since November 2010 in which it touched 509 units. Exports contribution to sales rose to 7.9% (up ~133 bps on an MoM basis). Exports witnessed an improvement to the tune of 22.9% YoY at 6,217 units
Sep-11 19,583 32,118 5,339 21,743 78,783 6,217 7.9 Sep-10 18,155 21,656 3,420 21,437 64,668 5,057 7.8 %chg 7.9 48.3 56.1 1.4 21.8 22.9 Aug-11 17,683 29,270 3,418 13,707 64,078 4,204 6.6 %chg 10.7 9.7 56.2 58.6 22.9 47.9 YTD12 103,449 166,993 22,630 106,400 399,472 30,890 8.5 YTD11 %chg 96,618 129,282 19,528 134,686 315,446 26,696 5.3 7.1 29.2 15.9 -21.0 26.6 15.7 -

20 (000's)

10

Jaguar JLR total volumes(RHS)

Land Rover

Source: SIAM, ICICIdirect.com Research

Exhibit 18: Volume performance (in units)

Segment M & HCV LCV Utility vehicles PV Total sales Exports Exports as % of sales Source: Company, SIAM

Mahindra and Mahindra: Sales volume

39.6

Mahindra and Mahindra (MAHMAH)

44.1

45
35.6 35.2 34.5 34.1 33.4 32.1 35.6

40
(000's)

35 30 25 20 15

Mahindra and Mahindra (M&M) reported excellent volume numbers with growth driven by both the automotive as well as FES segments. The total volumes were up ~31.0% YoY and ~28% MoM to 68,810 units The utility vehicle segment, inclusive of four-wheeler pick-ups, rose to 31,156 units, a 20.8% YoY jump. Volumes in the UV segment observed a robust performance due to higher sales of its Maximmo and Gio. Going ahead, this segment is expected to perform well with the company launching a passenger variant on the Maximmo platform. Volume numbers for Bolero and Scorpio were ~9700 and ~4,500 units, respectively, for the month. The sales of Xylo has seen an improvement vis--vis its competitor Tata Sumo clocking sales of ~2,400 odd units. Also, the recently launched Mahindra XUV500 (starting at ~| 10.8 lakh ex-showroom Delhi) has received an excellent response Automotive exports touched 3,000 units (up 128.9% YoY on a small base) with overall sales being high from the Asian region The farm equipment segment (FES) for M&M recorded its highest ever volume at 24,673 units. It witnessed a strong 41.1% YoY and 54.2% MoM rise. Domestic volumes surged 44.2% YoY to 23,508 units. On the exports front, volumes came in at 1,165 units. We believe the current volume pick-up is largely due to seasonality and the current run rate would be difficult to sustain in the coming months

36.7

37.5

37.7

26.7

Nov '10

Jul'11

Sep '10

Jan '11

Aug'11

Mar '11

Feb '11

Source: SIAM, ICICIdirect.com Research

Mahindra and Mahindra: Tractor sales

24.3 25 17.5 (000's) 20 15 10 5 0 Sep '10 Jan '11 Feb '11 Apr '11 Oct '10 Nov '10 Dec '10 Mar '11 May'11 Aug'11 Sep'11 Jun'11 Jul'11 22.7 24.7 30

May'11

Dec '10

Apr '11

Oct '10

Sep'11

Jun'11

20.5

19.0

19.8

18.0

18.5

18.9

16.3

16.7

Source: SIAM, ICICIdirect.com Research

ICICI Securities Ltd. | Retail Equity Research

16.0

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Exhibit 19: Volume performance (in units)

Segment Sep-11 Sep-10 %chg Aug-11 %chg YTD12 YTD11 UVs (inclusive of pick ups) 31,156 25,792 20.8 26,517 17.5 163,581 116,987 CVs 968 1,069 -9.4 1,135 -14.7 6,199 5,925 Verito 1,710 1,000 71.0 1,710 0.0 8,857 3,869 Total 4wheeler 33,834 27,861 21.4 29,362 15.2 178,637 126,781 3wheeler (Champion, Alfa) 7,302 6,005 21.6 6,394 14.2 33,149 38,979 Total Domestic 41,136 33,866 21.5 35,756 15.0 211,786 165,760 Exports 3,001 1,311 128.9 1,928 55.7 12,956 8,460 Total Sales 44,137 35,177 25.5 37,684 17.1 224,742 174,220 Exports as % of sales 7 4 5 5.8 4.9 Tractors - Domestic 23,508 16,300 44.2 15,059 56.1 111,658 90,005 - Exports 1,165 1,181 -1.4 944 23.4 5,888 5,653 Total Tractors 24,673 17,481 41.1 16,003 54.2 117,546 95,658 Exports as % of tractor sales 4.7 6.8 5.9 5.0 5.9 Source: Company, SIAM, Gio launched in Oct09, Maximmo launched in Feb10, Mahindra Navistar launched in April, 2010.FES~ is inclusive of Swaraj tractors , Verito is the refurbished version of Logan %chg 39.8 4.6 128.9 40.9 -15.0 27.8 53.1 29.0 24.1 4.2 22.9

series

Ashok Leyland: Total sales

12.2 14 10.4 10 (000's) 7.6 7.7 8 5.8 6 4 2 0 Feb '11 Sept '10 Apr '11 May '11 Jan '11 M ar '11 Oct '10 Nov '10 Dec '10 Aug'11 Sep'11 Jun'11 Jul'11 5.1 9.8 12

Ashok Leyland (ASHLEY)

8.0 7.8 7.2 8.6

5.5

5.7

Ashok Leyland (ALL) witnessed a volume decline of 17.2% YoY but grew on a sequential basis (up 18.8% MoM) to 8,576 units. The M&HCV sales remain muted on account of high interest rates with the segment growing 3.0% YoY The volumes in the M&HCV passenger segment fell on an MoM basis (down 10.9% MoM) at 1,818 units. The volume driver continues to be the goods segment posting 6,630 units (up 30.1% MoM). This rise in the goods segment has allayed some fears over commercial orders growth even in such a capex-unfriendly environment ALL has lost ~400 bps of market share YTD to peers like Tata Motors and Asia Motor works. The domestic market share of ALL in the commercial vehicle segment currently stands at 10.0%. Exports remained flat in September 2011 with sales clocking 1,120 units (up 6.7% QoQ). The export contribution to total sales in September 2011 reduced to 13.1% from 14.5% in the previous month mainly due to the lacklustre performance of the M&HCV segment in the domestic market
Sep-11 1,818 6,630 128 8,576 1,120 13.1 Sep-10 2,559 7,757 46 10,362 850 8.2 %chg -29.0 -14.5 178.3 -17.2 31.8 Aug-11 2,041 5,095 82 7,218 1,050 14.5 %chg -10.9 30.1 56.1 18.8 6.7 YTD12 11,453 30,980 472 42,905 5,769 13.4 YTD11 11,592 33,964 435 45,991 4,290 9.3 %chg -1.2 -8.8 8.5 -6.7 34.5

Source: SIAM, ICICIdirect.com Research

Exhibit 20: Volume performance (in units)

Segment M&HCV Passenger M&HCV Goods LCV Total Sales Exports Exports as % of sales Source: Company, SIAM

ICICI Securities Ltd. | Retail Equity Research

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Exhibit 21: ICICIdirect.com Research Universe (Auto OEM)

Tata Motors Idirect Code Mcap (|cr) Maruti Suzuki Idirect Code Mcap (|cr) M&M Idirect Code Mcap (|cr) Bajaj Auto Idirect Code Mcap (|cr) Escorts Idirect Code Mcap (|cr) Hero Honda Idirect Code Mcap (|cr) TELCO 53444 CMP(|) Target(|) % Upside 181 246 36.2 FY10 FY11 FY12E FY13E FY10 FY11 FY12E FY13E FY10 FY11E FY12E FY13E FY10 FY11E FY12E FY13E SY10 SY11E SY12E SY13E FY10 FY11E FY12E FY13E Sales (| cr) 92519.3 123133.3 144018.7 156569.7 28,958.5 36,128.2 38,117.3 44,878.9 18602.1 23493.7 29284.1 33575.2 12,043.5 16,975.0 20,375.7 23,077.7 2,764.8 3,290.4 3,539.4 3,844.7 19,669.3 19,401.2 22,211.5 24,571.1 EPS (|) 9.0 29.1 29.3 30.3 86.4 79.0 73.4 98.9 35.9 40.6 44.9 53.8 58.8 115.4 102.7 116.9 13.4 12.7 13.0 17.1 111.8 96.5 103.7 120.9 PE(x) 25.5 7.9 7.9 7.6 12.8 14.0 15.1 11.2 9.5 8.4 7.6 6.3 27.0 26.3 13.4 15.1 5.5 5.8 5.7 4.4 17.9 20.7 19.3 16.6 EV/E (x) 9.6 5.1 4.8 4.2 8.3 8.2 9.3 7.0 14.2 12.6 10.6 8.8 16.9 12.4 9.6 8.2 2.9 3.6 2.7 1.5 11.2 12.0 9.4 7.6 RoNW (%) 31.3 46.0 34.0 27.0 23.6 17.8 14.3 16.6 31.9 29.4 25.0 25.8 58.1 68.0 46.9 42.2 7.9 7.0 6.8 8.2 64.4 69.3 62.1 57.1 RoCE (%) 18.3 24.2 21.8 21.2 31.7 23.9 20.7 25.6 25.8 26.0 26.5 27.9 55.0 59.1 56.5 50.9 8.9 6.4 8.4 10.3 70.0 78.7 64.6 60.3

MARUTI 31381

CMP(|) Target(|) % Upside

1086 1286 18.5

MAHMAH 44036

CMP(|) Target(|) % Upside

808 775 -4.1

BAAUTO 45901

CMP(|) Target(|) % Upside

1,586 1,636 3.1

ESCORT 702

CMP(|) Target(|) % Upside

74 91 22.2

HERHON 40017

CMP(|) Target(|) % Upside

2001 1692 -15.4

Source: ICICIdirect.com Research

ICICI Securities Ltd. | Retail Equity Research

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ICICIdirect.com Universe price movement vis--vis BSE Auto index Exhibit 22: OEM comparison with BSE Auto
The chart compares the movement of OEM stocks in the ICICIdirect.com Universe with the BSE Auto index, thereby reflecting the degree of mimicking of the index Since January 2011, Bajaj Auto and M&M have outperformed while Maruti Suzuki and Escorts have underperformed in comparison to the index by being divergent on the upside and downside, respectively
200 190 180 170 160 150 140 130 120 110 100 90 80 70 60 50 40 30 Jan-11 Feb-11 Mar-11 BSE Auto M&M Apr-11 Bajaj Escorts May-11 Jun-11 Maruti Jul-11

BSE Auto Escorts Aug-11 Sep-11 Tata Motors

Hero Honda

Source:ICICIdirect.com Research

Exhibit 23: Ancillaries comparison with BSE Auto

The chart compares the movement of auto ancillary stocks in the ICICIdirect.com universe with the BSE Auto index The volatile nature of smaller ancillary companies is reflected. These have met with numerous fluctuations with the exception of larger market capitalisation companies like Exide Industries, which mimic the index greatly. JK tyre and Subros have grossly underperformed due to the intense rubber price overhang and production disruption at Maruti respectively.
175 155 135 115 95 75 55 35 Jan-11 Bharat Forge Mar-11 Feb-11 BSE Auto Balkrishna Subros Apr-11 May-11 Jun-11 Auto Axl JK Tyres Motherson Sumi Jul-11 Aug-11 Sep-11 Bharat Forge Apollo Tyres Exide Inds Subros JK Tyres BSE Auto Auto Axl

Source: ICICIdirect.com Research

ICICI Securities Ltd. | Retail Equity Research

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RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Sector view: Over weight compared to index Equal weight compared to index Under weight compared to index Index here refers to BSE 500 Pankaj Pandey Head Research ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai 400 093 research@icicidirect.com ANALYST CERTIFICATION
We /I, Karan Mittal MBA Nishant Vass MBA (FINANCE) Aman Daga MBA research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.

pankaj.pandey@icicisecurities.com

Disclosures:
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ICICI Securities Ltd. | Retail Equity Research

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