3FY2007 auto earnings preview: Sharekhan Special dated January 05, 2007

[Sunil]

 

Sharekhan Special [January 05, 2007] Please see the attachment for details Share khan www.sharekhan.com

Summary of Contents   SHAREKHAN SPECIAL Q3FY2007 auto earnings preview    Auto volumes remained robust in Q3FY2007 led by the festive season and strong economic activity. As in the past few quarters, the four-wheeler sector has continued to outpace the growth witnessed in two-wheelers. The growth in the commercial vehicle segment continued unabated in Q3FY2007 and we expect the segment to report a strong growth in Q4FY2007 despite the high base. The passenger car segment sales were quite buoyant with various new models being launched in the period coupled with the incentives offered by all the auto majors. Looking at the heavyweights, Bajaj Auto's sales grew by 22.9% in Q3FY2007, while Hero Honda reported a rise of 12.4% in its motorcycle sales. Maruti's car sales grew by 18.7%, Mahindra & Mahindra's (M&M) overall sales were up by 17.7% and Tata Motors' commercial vehicle sales (including exports) grew by 38%. The strong volume growth during the quarter with stable raw material prices should lead to a margin expansion on a quarter-on-quarter (q-o-q) basis. However, we expect the margin pressure to continue in the two-wheeler segment due to the intensified competition and various sales promotion activities undertaken by the major players.  We expect Ceat, Apollo Tyres, M&M, Ashok Leyland and Tata Motors to be among the leaders in performance in the sector for Q3FY2007.

Regards, The Sharekhan Research Team myac...@sharekhan.com

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