Automobile Industry Snapshot

Demand momentum witnessed during 1HFY15 tapered down in 2HFY15. During 4QFY15, most of players reported weak volume numbers. Restoration of excise duty and slowdown in rural sales had negative impact on auto demand. Two wheelers and tractors sales saw sharp deceleration in demand due to various issues impacting rural income. In

the past few months, passenger car demand too have slowed down. MHCV segment continued the growth journey in 4QFY15.

From our coverage universe, players like Ashok Leyland, Maruti Suzuki, Eicher Motors and TVS Motors reported YoY increase in volumes. We accordingly expect these companies to report YoY growth in revenues. On the EBITDA margin front, we expect Ashok Leyland, Maruti Suzuki and Eicher Motors to report - both YoY and QoQ expansion in margins. We thereby expect Ashok Leyland, Maruti Suzuki and Eicher Motors to show

strong growth in their earnings.

Companies	Q4FY15	Q3FY15	QoQ%	Q4FY14	YoY%
Ashok Leyland	34,036	25,937	34.0	26,043	30.7
Bajaj Auto	782,669	984,520	(20.5)	935,795	(16.4)
Escorts	11,036	15,881	(30.5)	15,556	(29.1)
Hero Moto Corp	1,575,501	1,648,566	(4.4)	1,589,462	(0.9)
Maruti Suzuki	346,712	323,911	7.0	324,870	6.7
M&M (Auto)	123,175	113,396	8.6	136,487	(9.8)
M&M(Tractor)	38,604	59,714	(35.4)	55,374	(30.3)
TVS Motors	602,000	655,571	(8.2)	563,681	6.8

Apollo Tyres (APTY): Given overall weak demand scenario, we do not expect APTY's revenue to witness growth. In fact, revenues will be impacted by sell out of South African operations. Company's EBITDA margin on a YoY basis, is expected to expand due to drop in raw material prices. However, sequentially natural rubber has moved northwards and this is expected to lead to some decline in EBITDA margin, QoQ.

Ashok Leyland: Turnaround in MHCV demand is expected to translate into sharp earnings growth for ALL. On the back of 31% YoY jump in volumes and product mix change, revenues are expected to grow on a strong note. Strong volume growth will lead to operating leverage benefits and accordingly improve EBITDA margins. Strong topline growth and EBITDA margin improvement will result in significant YoY growth in earnings for ALL. Similarly, on a QoQ basis too, we expect strong jump in earnings.

Bajaj Auto (BAL): For BAL, 4QFY15 was a difficult period with volumes coming down by 16% YoY and 21% QoQ. We expect volume de-growth and lower share of exports to negatively impact company's margins. We expect Bajaj Auto's net profit in 4QFY15 to decline by 19% YoY and 21% QoQ. 

Eicher Motors (EML): We expect EML's standalone revenues to grow at a robust pace on the back of 45% YoY increase in sales volumes. Standalone EBITDA margin is expected to see some improvement - both YoY and QoQ. We thereby expect healthy increase in standalone earnings. We also expect VECV business to post improved performance on the back of increase in volumes and expected expansion in margins. At the consolidated level, we expect robust positive change in net profits.

Escorts Ltd: Tractor demand in 4QFY15 came down significantly on the back of lower khariff production and unseasonal rains spoiling Rabi crops. Escorts tractor sales volume were down by 29% YoY. Fall in sales volume will lead to negative operating leverage and will negatively impact margins. We expect Escorts to report marginal loss during the quarter.

Hero MotoCorp (HMC): HMC's performance in 4QFY15 is likely to be subdued due to weak sales impacted by rural slowdown. We expect revenue growth to stay flat on the back of marginal decline in volumes. EBITDA is expected to be lower YoY. However, on a QoQ basis, we expect margins to improve by 100bps. Other expenses in 3QFY15 were on the higher side and that is expected to get corrected in 4QFY15. Further restoration of excise duty to earlier levels should aid HMC as it's Haridwar plant falls under excise free zone. We expect the company’s net profit on a YoY basis to increase as 4QFY14 results includes impact of royalty amortization.

Maruti Suzuki India (MSIL): MSIL's volumes in 4QFY15 grew by 7% - both YoY and QoQ. We thereby expect YoY and QoQ increase in revenues. EBITDA margins is expected to expand primarily led by JPY depreciation. We expect MSIL to report healthy growth in net profit in 4QFY15. 

Mahindra and Mahindra (M&M): M&M's 4QFY14 financials include MTBL's full year financial impact and hence is not comparable with 4QFY15 financials. M&M's 4QFY15 financials will be impacted by weak demand for company's auto product and sharp decline in tractor demand. We expect revenues to de-grow on account of volume decline. Margins are expected to suffer on account of inferior segment mix and negative operating leverage due to fall in volumes. Revenue de-growth coupled with EBITDA margin erosion

is expected to lead to sharp YoY dip in net profits for M&M.

TVS Motors (TVSM): TVSM is expected to report YoY improvement in earnings backed primarily by volume growth. However, on a QoQ basis, company is expected to report 4% lower earnings due to 8% decline in volumes.

Motherson Sumi Systems Limited (MSSL): We expect MSSL to report 6% YoY revenue growth in 4QFY15. EBITDA margin is expected to remain similar YoY. Euro depreciation against INR is expected to negatively impact consolidated revenue and EBITDA (in INR terms). We expect the company's PAT to grow by 2% YoY and 11% QoQ. In Euro terms, SMR and SMP is expected to report increased revenues due to start of new facilities.