Monthly Update | December 2009

January 5, 2010

Vaishali Jajoo
Auto Sector Update +91 22 4040 3800 Ext: 344
vaishali.jajoo@angeltrade.com
2009 ends on a high!
Shreya Gaunekar
Auto sales continued to be robust for all the auto majors across segments, as new
+91 22 4040 3800 Ext: 331
launches, upbeat consumer sentiment and benign interest rates played well, and the shreyap.gaunekar@angeltrade.com
calendar year ended with record-breaking volumes after the downturn. Inspite of the
low base effect, most of the players also showcased an M-o-M growth in the second
half of the year, with September and October leading in terms of sales volume.

In the month of December 2009, the Two-wheeler and Passenger Vehicle (PV) segments
dominated growth , particularly with exports in Europe for passenger cars, and new
launches in the two-wheeler segment in the domestic market. The Commercial Vehicle
(CV) segment has shown a good recovery, aided by improving industrial production.
The Light Commercial Vehicle (LCV) and Utility Vehicle (UV) segments also continued
their growth momentum. The volumes beat market expectations, affirming the upturn
viewed for the Auto industry, going ahead.

Maruti Suzuki (Maruti) recorded a robust 50.6% yoy growth. The company
continued its exceptional growth on the exports' front, at 223.7% yoy, despite the
discontinuation of scrappage norms in Europe. According to the management,
the capacity constraints faced by the company due to excessive demand in the
festive season is expected to be normalised in the coming months. The passenger
car segment grew by 37.1% yoy, primarily due to the growth in exports.

Mahindra & Mahindra (M&M) continued the momentum in its monthly sales, with
an overall robust growth of 95.1% yoy, led by growth in the UV, LCV and
three-wheeler segments, at 120%, 118.1% and 145.4% yoy, respectively, in the
Auto division. The company has grown extremely well on the domestic front, growing
at around 100.3% yoy. The Tractor Segment grew by a 65.8% yoy, aided by a
strong 67.9% yoy growth in domestic Tractor volumes and a healthy recovery
posted in the Export tractor segment, of 42.7% yoy.

Tata Motors (TML) reported a robust 104.7% yoy growth in total volumes, with the
Medium and Heavy Commercial Vehicles (M&HCV) segment leading the growth
at 217% yoy, followed by the LCV segment growing at 103% yoy. Exports also
boosted the company's performance, as it reported a 160.7% yoy growth, partially
on account of a lower base from the downturn in FY2009. Passenger cars also
showed a healthy growth of 48.4% yoy, with new launches by the company (such
as Manza) clocking volumes for the company.

Two
wo-- and Three
Three--Wheelers: Hero Honda (HH) reported a strong growth in the
two-wheeler pack, with a 74.1% yoy growth, closing the year on better-than-expected
sales of 4.4mn units, against the management's estimate of around 4mn units.
Bajaj Auto (BAL) led the pack with a striking 77.3% growth, thanks to its key
brands, Pulsar and Discover, performing well in the month. BAL also launched the
all new Pulsar 135 LS in December, with the aim of scaling the Pulsar to be a
million units/year brand. TVS Motor (TVS) clocked a 34.1% yoy growth, due to
decent growth registered by its Scooter and Moped Segments. The recently launched
TVS Jive (launched in Tamil Nadu) and the TVS Wega have received a good response,
and are expected to be launched pan-India in the coming months.

Please refer to important disclosures at the end of this report

 Auto Sector Update | December 2009

Tata Motors

TML grew a robust 104.7% yoy, led
by growth in the M&HCV segment,
affirming signs of industrial recovery
z TML registered a 104.7% yoy growth in Total sales to 51,627 units (25,219)
z M&HCV segment recorded a yoy growth of 217.5% on signs of industrial recovery
z Indica sales were at 4,228 units, a decline of 37% yoy; Indigo recorded sales of
5,106 units, a growth of 205.2% yoy, on the wide acceptance of the newly-launched
Manza
z Sumo/Safari/Xenon XT range recorded sales of 1,710 units, a growth of 21% yoy
z PV Segment reported a 48.4% yoy growth, with the Nano selling 3,610 units

Exhibit 1: Tata Motors

December YTD
Segment 2009 2008 % chg FY20 10
FY2010 FY2009 % chg
Total Sales 51,627 25,219 104.7 432,629 363,329 19.1
M&HCV 16,664 5,249 217.5 110,416 93,992 17.5
LCV 19,724 9,704 103.3 163,648 124,099 31.9
Total CV 36,388 14,953 143.3 274,064 218,091 25.7
Utility Vehicles 1,807 1,442 25.3 22,518 28,403 (20.7)
Cars 13,432 8,824 52.2 136,047 116,835 16.4
Total PV 15,239 10,266 48.4 158,565 145,238 9.2
Exports (Inc Above ) 3,454 1,325 160.7 23,522 29,066 (19.1)
Source: Company, Angel Research

Exhibit 2: CV Segment
45,000 150
40,000 120
35,000
90
30,000
60
(Units)

(%)
25,000
30
20,000
0
15,000
10,000 (30)

5,000 (60)
Aug-07
Sep-07
Oct-07

Dec-07

Feb-08
Mar-08
Apr-08
May-08

Aug-08
Sep-08
Oct-08

Dec-08

Feb-09
Mar-09
Apr-09
May-09

Aug-09
Sep-09
Oct-09

Dec-09
Nov-07

Jan-08

Jun-08
Jul-08

Nov-08

Jan-09

Jun-09
Jul-09

Nov-09

Volume(LHS) % yoy growth(RHS)

Source: Company, Angel Research

Exhibit 3: PV Segment
70
26,000
23,000 50

20,000 30
(Units)

17,000
10
(%)

14,000
(10)
11,000
8,000 (30)

5,000 (50)
Dec-07

Dec-08

Dec-09
Apr-08
May-08

Apr-09
May-09
Aug-07
Sep-07
Oct-07
Nov-07

Jan-08
Feb-08
Mar-08

Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08

Jan-09
Feb-09
Mar-09

Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09

Volume(LHS) % yoy growth(RHS)

Source: Company, Angel Research

January 5, 2010 2
 Auto Sector Update | December 2009

Maruti Suzuki

Maruti sales grew by 50.6% yoy on
the back of a strong growth in Exports
z Maruti's Total Sales grew by a robust 50.6% yoy to 84,804 units (56,293)
z The A2 segment grew by 41.8% yoy; C segment sales spiked by 51.2% yoy
z Maruti reported excellent export growth at 223.7% yoy, despite the discontinuation
of scrappage norms in Europe in December
z The management had indicated capacity constraints to provide for the excessive
festive season demand; however, the management now expects the demand to be
normalised in the coming months
z Exports grew on an M-o-M basis as well, and are expected to establish a run-rate
of 11,000 vehicles (around 13,000-14,000 vehicles in 1HFY2010), in light of the
stoppage of the scrappage norms incentive

Exhibit 4: Maruti Suzuki

December YTD
Segment 2009 2008 % chg FY20 10
FY2010 FY2009 % chg
Total Sales 84,804 56,293 50.6 730,943 558,532 30.9
A1 M800 2,574 2,907 (11.5) 24,594 40,307 (39.0)
C Omni, Versa 8,088 5,350 51.2 68,859 56,527 21.8
A2 Alto, Wagon R, Zen,Swift , A-Star, Ritz 52,236 36,831 41.8 459,507 358,751 28.1
A3 SX4, Dezire 7,843 6,524 20.2 69,613 52,703 32.1
Total PPassenger
assenger Cars 70,741 51,612 37.1 622,573 508,288 22.5
MUV Gypsy, Vitara 259 417 (37.9) 2,835 5,374 (47.2)
Domestic 71,000 52,029 36.5 625,408 513,662 21.8
Exports 13,804 4,264 223.7 105,535 44,870 135.2
Source: Company, Angel Research

Exhibit 5: PV Segment
90,000 80
70
85,000
60
80,000 50
75,000 40
(Units)

30

(%)
70,000
20
65,000 10
60,000 0
(10)
55,000 (20)
50,000 (30)
Sep-07

Feb-08
Mar-08

Sep-08

Feb-09
Mar-09

Sep-09
Aug-07

Oct-07
Nov-07
Dec-07
Jan-08

Apr-08
May-08
Jun-08
Jul-08
Aug-08

Oct-08
Nov-08
Dec-08
Jan-09

Apr-09
May-09
Jun-09
Jul-09
Aug-09

Oct-09
Nov-09
Dec-09

Volume(LHS) % yoy growth(RHS)

Source: Company, Angel Research

Mahindra & Mahindra

M&M grew 95.1% yoy on the back of
robust growth in the UV, LCV and
Three-Wheeler segments
z M&M reported a growth of 95.1% yoy to 36,440 units (18,676)
z Tractor Segment grew by a robust 65.8% yoy, aided by a strong 67.9% yoy growth
in domestic Tractor volumes
z The Automotive Segment grew by a healthy 114.8% yoy growth, supported by a
35.7% yoy growth in the Auto-export segment
z The UV (including XYLO, Bolero and Pick-Ups), LCV and the Three-Wheeler (incl.
Mahindra Gio) segments reported growth at 120%, 118.1% and 145.4% yoy
z Logan sales grew by 13.2% yoy, after continuous de-growth in the 1HFY2010

January 5, 2010 3
 Auto Sector Update | December 2009

Exhibit 6: Mahindra & Mahindra

December YTD
Segment 2009 2008 % chg FY20 10
FY2010 FY2009 % chg
Total Sales 36,440 18,676 95.1 335,453 256,461 30.8
Utility Vehicles 16,999 7726 120.0 154,602 105,565 46.5
LCV 700 321 118.1 7,187 6,880 4.5
Logan 308 272 13.2 3,889 11,416 (65.9)
Three wheelers 4,747 1934 145.4 35,522 34,252 3.7
Exports 1,247 919 35.7 6,586 8,005 (17.7)
Total Auto Sales 24,001 11,172 114.8 207,786 166,118 25.1
Domestic Tractor Sales 11,517 6858 67.9 105,820 84,161 25.7
Exports Tractor Sales 922 646 42.7 21,847 6,182 253.4
Total TTractor
ractor Sales 12,439 7,504 65.8 127,667 90,343 41.3
Source: Company, Angel Research; Note: Tractor sales include figures of Swaraj Division

Exhibit 7: UV Segment
24,000
130
21,000
100
18,000

15,000 70
(Units)

12,000

(%)
40
9,000
10
6,000
(20)
3,000

0 (50)
Aug-07
Sep-07
Oct-07

Dec-07

Feb-08

Apr-08
May-08

Aug-08
Sep-08
Oct-08

Dec-08

Feb-09

Apr-09
May-09

Aug-09
Sep-09
Oct-09

Dec-09
Nov-07

Jan-08

Mar-08

Jun-08
Jul-08

Nov-08

Jan-09

Mar-09

Jun-09
Jul-09

Nov-09
Volume (LHS) % yoy growth (RHS)

Source: Company, Angel Research

Exhibit 8: Tractor Segment

22,000 160
140
19,000
120
16,000 100
(Units)

13,000 80

(%)
60
10,000
40
7,000 20
0
4,000
(20)
1,000 (40)
Sep-07

Feb-08

Sep-08

Feb-09

Sep-09
Aug-07

Oct-07
Nov-07
Dec-07
Jan-08

Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08

Oct-08
Nov-08
Dec-08
Jan-09

Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09

Oct-09
Nov-09
Dec-09

Volume (LHS) % yoy growth (RHS)

Source: Company, Angel Research

January 5, 2010 4
 Auto Sector Update | December 2009

Bajaj Auto (BAL)

BAL reported a 77.3% yoy growth in
Sales, led by Pulsar and Discover;
135 LS Pulsar launched in December
z BAL reported an overall Sales growth of 77.3% yoy to 252,004 units (142,163)
z The Motorcycle segment grew by 85.6%, and has been led equally by its two
game-changer brands, Pulsar (44,518 units) and Discover (86,769 units)
z The Scooter Segment de-grew by 27.8% to 509 units
z The Three-wheeler Segment reported a healthy 37.6% yoy growth to 31,575 units
(22,948), with the RE600 goods carrier exhibiting strong growth in December
2009
z Bajaj launched the all new Pulsar 135 LS in December, with the aim of scaling the
Pulsar to be a million units/year brand

Exhibit 9: Mahindra & Mahindra

December YTD
Segment 2009 2008 % chg FY20 10
FY2010 FY2009 % chg
Bajaj Auto 252,004 142,163 77.3 2,043,705 1,753,885 16.5
Motorcycles 219,920 118,510 85.6 1,794,457 1,534,149 17.0
Scooters 509 705 (27.8) 4,593 10,037 (54.2)
Total 2 Wheelers 220,429 119,215 84.9 1,799,050 1,544,186 16.5
Three Wheelers 31,575 22,948 37.6 244,655 209,699 16.7
Export (Incl Above) 91,369 72,744 25.6 676,627 620,880 9.0
Source: Company, Angel Research

Exhibit 10: Motorcycle Segment

285,000 100

255,000 80

60
225,000
40
(Units)

195,000

(%)
20
165,000
0
135,000
(20)

105,000 (40)

75,000 (60)
Sep-07

Feb-08

Mar-08

Jul-08

Sep-08

Feb-09

Mar-09

Jul-09

Sep-09
Aug-07

Oct-07

Nov-07

Dec-07

Jan-08

Apr-08

May-08
Jun-08

Aug-08

Oct-08

Nov-08

Dec-08
Jan-09

Apr-09

May-09

Jun-09

Aug-09

Oct-09
Nov-09

Dec-09

Volume (LHS) % yoy growth (RHS)

Source: Company, Angel Research

Exhibit 11: Three-wheeler Segment

35000 70

60

30000 50
40
(Units)

25000 30
(%)

20
20000 10

15000 (10)
(20)

10000 (30)
Aug-07

Sep-07
Oct-07

Dec-07

Feb-08

Mar-08

Apr-08

May-08

Jul-08

Aug-08
Sep-08

Oct-08

Dec-08

Feb-09

Mar-09
Apr-09

May-09

Jul-09
Aug-09

Sep-09

Oct-09

Dec-09
Nov-07

Jan-08

Jun-08

Nov-08

Jan-09

Jun-09

Nov-09

Volume (LHS) % yoy growth (RHS)

Source: Company, Angel Research

January 5, 2010 5
 Auto Sector Update | December 2009

Hero Honda (HH)

HH registered a healthy growth of
74.1% and recorded 4.4mn
motorcycle sales in 2009
z HH sold 375,838 units (215,931), registering a healthy growth of 74.1% yoy,
despite a high base effect of its December 2008 volumes
z The management has reported growth across segments, including the Basic 100cc,
150cc segment in the motorcycle segment. Additionally, the Pleasure has been
growing in the scooter segment at an average of 16,000 units sold per month
z The management has guided for a slew of more launches across segments, which
will augur well for the company's product mix

Exhibit 12: Hero Honda

December YTD
Segment 2009 2008 % chg FY20 10
FY2010 FY2009 % chg
Hero Honda 375,838 215,931 74.1 3,413,594 2,724,145 25.3
Source: Company, Angel Research

Exhibit 13: Motorcycle Segment

450,000 100

400,000 80

350,000
60
(Units)

300,000

(%)
40
250,000
20
200,000

150,000 0

100,000 (20)
Aug-07
Sep-07
Oct-07
Nov-07
Dec-07

Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08

Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
Dec-09
Jan-08

Jan-09

Volume(LHS) % yoy growth(RHS)

Source: Company, Angel Research

TVS Motors (TVS)

TVS clocked a 34.1% yoy growth, on
the back of growth in the Scooter and
Moped segments
z TVS clocked a 34.1% yoy growth to 119,701 units (89,285)
z Domestic sales grew by 41.6% yoy to 102,479 units (72,355)
z The Scooter Segment recorded a 48.5% yoy growth to 21,566 units (14,521)
z The Motorcycle Segment grew by 23.7% yoy to 49,560 units (40,057)
z Exports grew by a marginal 1.7% to 17,222 units (16,930)
z The recently launched TVS Jive (launched in Tamil Nadu) and the TVS Wega have
received good response, and are expected to be launched pan-India in the
coming months

Exhibit 14: TVS Motors

December YTD
Segment 2009 2008 % chg FY20 10
FY2010 FY2009 % chg
TVS Motors 119,701 89,285 34.1 1,109,144 1,006,689 10.2
Motorcycles 49,560 40,057 23.7 458,726 486,502 (5.7)
Scooters 21,566 14,521 48.5 228,471 196,305 16.4
Mopeds 48,575 34,707 40.0 421,947 323,882 30.3
Export (Incl Above) 17,222 16,930 1.7 110,132 146,475 (24.8)
Source: Company, Angel Research

January 5, 2010 6
 Auto Sector Update | December 2009

Exhibit 15: Scooter Segment

30,000 60

50

40
25,000
30

20

(Units)

(%)
20,000
10

0
15,000
(10)

(20)

10,000 (30)

Dec-07

Apr-08
May-08

Dec-08

Apr-09
May-09

Dec-09
Aug-07
Sep-07
Oct-07
Nov-07

Jan-08

Feb-08
Mar-08

Jun-08
Jul-08
Aug-08

Sep-08
Oct-08
Nov-08

Jan-09
Feb-09

Mar-09

Jun-09
Jul-09
Aug-09
Sep-09

Oct-09
Nov-09
Volume (LHS) % yoy growth (RHS)

Source: Company, Angel Research

Exhibit 16: Motorcycle Segment

75,000 40

70,000 30

65,000 20

10
60,000
(Units)

0
55,000

(%)
(10)
50,000
(20)
45,000
(30)
40,000 (40)
35,000 (50)

30,000 (60)
Aug-07
Sep-07
Oct-07
Nov-07

Dec-07
Jan-08
Feb-08
Mar-08

Apr-08
May-08
Jun-08
Jul-08
Aug-08

Sep-08
Oct-08
Nov-08
Dec-08
Jan-09

Feb-09
Mar-09
Apr-09
May-09

Jun-09
Jul-09
Aug-09
Sep-09
Oct-09

Nov-09
Dec-09
Volume (LHS) % yoy growth (RHS)

Source: Company, Angel Research

Outlook

We remain positive on the Indian Auto Sector. However, most of the Auto stocks have
registered a sharp run-up in the last one year and have outperformed the broader
indices, which, we believe, is justified, in view of their relatively better Earnings growth
prospects. On a relative trade-off basis, we expect these stocks to continue to outperform
the benchmark indices in the medium-term. We prefer M&M, Maruti Suzuki and
Bajaj Auto. However
However,, since most of the Auto stocks have registered a sharp
run-up in the last six months, we advise investors to Accumulate these stocks at
lower levels.

Exhibit 17: Auto Companies - Relative Valuations and Recommendations

Company Recos CMP Trget EPS P/E (x) EV/EBITD
EV/EBITDAA (x) RoCE (%)
(Rs) (Rs) FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
Ashok Leyland Neutral 52 - 2.6 3.4 3.9 20.1 15.4 13.4 11.6 9.8 8.6 10.3 11.5 8.9
Bajaj Auto Accumulate 1,736 1915 103.6 115.7 127.7 16.8 15.0 13.6 12.5 11.4 10.3 48.1 40.7 36.3
Hero Honda Accumulate 1,716 1904 102.3 109.6 119.0 16.8 15.7 14.4 11.2 10.0 8.6 50.0 41.0 36.5
M&M Accumulate 1,151 1211 57.4 60.4 64.3 20.0 19.1 17.9 13.4 12.9 11.6 17.7 15.9 16.0
Maruti Suzuki Buy 1,516 1873 82.4 97.4 110.2 18.4 15.6 13.8 13.9 11.4 9.6 19.0 19.4 18.9
Tata Motors Accumulate 811 859 (1.2) 42.2 61.2 - 19.2 13.2 19.8 10.8 8.4 2.0 9.3 12.8
TVS Motors Accumulate 71 78 3.9 5.3 6.8 18.0 13.4 10.5 9.8 8.2 7.0 7.3 9.8 12.0
Source: C-line, Company, Angel Research; Note: Market Price as of January 5, 2010.

January 5, 2010 7
 Auto Sector Update | December 2009

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 Auto Sector Update | December 2009

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Recipients of this material should rely on their own investigations and take their own professional advice. Each recipient of this document
should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies
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of such an investment. Price and value of the investments referred to in this material may go up or down. Past performance is not a guide
for future performance. Certain transactions - futures, options and other derivatives as well as non-investment grade securities - involve
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movement and trading volume, as opposed to focusing on a company's fundamentals and as such, may not match with a report on a
company's fundamentals.

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Disclosure of Interest Statement

Company Analyst owership of the stock Angel Group owership of the stock Broking relationship with company covered
Ashok Leyland No No No
Tata Motors Yes Yes No
Maruti Suzuki Yes Yes No
Mahindra & Mahindra Yes No No
Bajaj Auto No Yes No
Hero Honda No No No
TVS Motor No No No

Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
Reduce (-5% to 15%) Sell (< -15%)