Excise hike effective at the start of 2015, and unseasonal rains effected automobile sector sales. Impact was visible in motorcycle sales volumes at 6.3 pct YoY decline. Sales were down for a second quarter in a row.In fact two wheeler companies are likely to account for 5 pct revenue growth and 1 pc decline in EBITDA. Numbers stay on the lower side of negativity owing to positive performance by Royal Enfield. Earnings growth could look bleak for two wheeler companies, except RE. For other Indian two wheeler manufcaturers, revenue growth is expected at around 1 pct or just over, and 8 pct decline in EBITDA. Bajaj Auto could be headed to one of its lowest quarters (margins at 16 pct), owing to decline in exports (down -12 pct YoY, -29 pct QoQ).
Hero MotoCorp may not show strong margin improvement despite reversal of excise duty benefits. ICICI Securities expects 1 pct improvement QoQ for Hero. Within the Two Wheeler industry, scooter segment sales growth is a positive in Q1 2015. As such, TVS Motors revenue growth is likely to triumph Hero MotoCorp and Bajaj Auto, but EBITDA growth may be limited.
Lower earnings could see two wheeler companies have a cautious outlook for motorcycles in FY16. Hero MotoCorp is likely to launch 2 new scooters, but ICICI Securities has lowered EBITDA expectations by 6 pct in FY17. Expected success of CT100 and new Pulsar variants is not likely to help Bajaj Auto attain 220K domestic volume per month as early as expected by ICICI Securities earlier. In quick succession Bajaj Auto has launched Bajaj AS200, Bajaj AS150, and Bajaj RS200 (The fastest Pulsar yet). 3 more Pulsar launches are in the offing. These include Bajaj Pulsar 400 CS and Pulsar 400 SS. With export volatility expected to continue for a while, Bajaj Auto would have to do without currency benefits in pricing. As a result, expected FY17 EPS is lowered by 8 pct.
Mahindra tractor sales decline was reported at 33 pct YoY. M&M looks towards negative revenue and margins. Passenger car and 6 tonne+ CV sales grew at reasonable pace despite excise hike in January 2015. Maruti Suzuki and Ashok Leyland revenue growth and margin improvement is anticipated to be strong. post Q4FY15, Ashok Leyland earnings growth may be more backended (FY17).·
Yen depreciation and new product launches benefit Maruti Suzuki, helping it grow faster than the industry. Ashok Leyland posts its best result in 8 preceding quarters. M&M is likely to post a weak result owing to tractor volume decline.