DSIJ.in JULY 22 - AUG 4, 2019 I DALAL STREET INVESTMENT JOURNAL (^43)
consideration 13 auto companies' financial performance. The
aggregate sales of these companies grew marginally by 6 per
cent yoy to 579907 crore in FY19. The companies that reported exceptionally good revenue growth were HMT (30 per cent revenue growth), Escorts (23 per cent growth) and TVS Motor (21 per cent growth). In recent times, Bajaj Auto has gained market share in the motorcycle segment, which helped it to report 18 per cent yoy growth in net sales. However, companies like Hero MotoCorp and Tata Motors reported muted yoy growth of 3 per cent each. In terms of operating profit, the industry witness pressure from higher input costs and registered a 7 per cent declined in operating profit to63350.14 in FY19. HMT and Tata motors
reported 86 per cent and 19 per cent fall in operating profit.
Despite input pressure the companies like TVS Motor
Company and Escorts reported strong operating profit growth
of 40 per cent and 31 per cent respectively.
In terms of net profit, the industry performance was dragged
down by the CV major Tata Motors which reported net loss of
28933.70 crore. The aggregate bottomline of industry turned in loss of3143.2 crore as against net profit of 31317.93 crore. However, despite industry headwinds, Escorts, Ashok Leyland, and Bajaj Auto reported 38 per cent, 21 per cent and 16 per cent yoy growth in net profit. The other major players that reported negative PAT growth were Hero MotoCorp and Maruti Suzuki. In June 2019, the CV segment witnessed nearly 12 per cent decline, but players like Ashok Leyland, Eicher Motors and M&M underperformed the industry, while Tata Motors outperformed the industry as its volume was down by only 7 per cent. The stress in the auto industry has been clearly reflected in the stock prices of auto companies as seen in the chart below. Except Bajaj Auto, no other auto producers managed to even post positive return for its investors. Company Name 2019 Return Tata Motors -13% HMT -23% The Yamuna Syndicate -7% Hero MotoCorp -23% Maruti Suzuki India -21% Force Motors -20% Eicher Motors -19% TVS Motor Company -28% Mahindra & Mahindra -23% Atul Auto -8% Bajaj Auto 0% Ashok Leyland -17% Escorts -24% Outlook The price hikes by auto producers owing to higher production cost caused by recently implemented safety norms and a transition to BS-VI norms from April 1, 2020 would put pressure on demand. However, due to transition to BS-VI norms, there could be some pre-buying in Q4FY20, but the recovery is unlikely to support long term sustainable growth. Also, the higher input costs at a time when the industry is facing demand slowdown would cause deterioration in margins. Thus, going forward, the demand for auto industry in the near term is likely to remain under pressure. However, factors such as three rate cut in 2019 and good monsoons are likely to play a pivotal role in reviving the demand outlook for the auto industry in the long run. Further, the Reserve Bank of India's efforts to improve liquidity situation in the country should help dealers and customers to start buying. Weak retail demand and higher channel inventory will continue to affect wholesale despatches. With an early start to the festive season, a slew of new model launches and a low base, we anticipate a gradual improvement in sales starting August '19. 260.93 248.67 181.99 4.91 -8.79 -2.88 4.93 19.38 21.68 19.58 151.00 151.00 151.00 170.29 145.80 140.98 18.08 2.96 16.45 16.80 20.97 20.54 24.00 289.37 289.37 289.37 40.25 36.61 61.38 8.43 6.68 10.10 9.95 14.98 15.38 14.92 595.80 594.97 296.81 718.88 612.67 492.65 6.27 3.40 2.01 17.34 31.35 34.13 38.74 27.28 27.26 27.21 172.42 186.30 179.48 2.63 -5.76 -7.27 -7.45 27.16 32.97 33.74 39.95 39.94 39.94 -84.89 26.47 21.95 3.28 -18.53 NA NA -37.19 8.88 8.85 679.22 679.22 679.22 7.08 6.01 5.58 10.96 15.60 20.81 17.74 27.14 26.34 28.24 293.55 292.71 284.59 14.83 13.73 10.76 20.71 40.09 8.96 8.02 24.75 27.15 25.24 47.51 47.51 47.51 39.07 28.31 10.71 23.26 30.88 37.95 38.01 19.57 18.07 8.47 122.58 122.58 122.58 -1.26 -4.52 -2.31 29.82 NA NA NA 0.00 0.00 0.00 355.60 1204.09 1204.09 111.02 136.08 135.21 3.65 4.10 0.15 -18.42 8.49 11.41 12.75 13.18 13.18 13.18 21.90 16.78 21.60 17.11 12.31 15.00 30.54 22.90 22.02 50.81 10.97 10.97 10.97 114.00 356.00 411.00 18.30 31.82 -67.98 -67.98 5.80 18.88 18.13 3.07 3.07 2.12 EPS () YoY Growth FY19 (%) RoNW (%) Equity (` in Cr.)
FY19 FY18 FY17 Sales Operating Profit PAT EPS FY19 FY18 FY17 FY19 FY18 FY17
martin jones
(Martin Jones)
#1