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Date: May 16, 2007

Review of Automobile Sector

We are pleased to send you review of Automobile Sector

INDIAN AUTOMOBILE SECTOR

The Indian automobile market is plagued with excess capacity. Demand is largely cyclical in nature and dependent upon economic growth and per capita income. In the first half of 2007, low interest rates was a major demand driver as it brought down the cost of owning a vehicle. But in the second half, the demand slackened as interest rates firmed up. Rising interest rates may impact passenger car sales in the short to medium term. Further increase in interest rate is also likely to impact the sales volume.

TWO WHEELER SEGMENT

According to industry experts Indian automobile sales will grow at CAGR of 9.5% to 1,30,008 millions by 2010.
Market size is expected to grow by 12%-15%.
TVS, Hero Honda and Honda are poised to benefit from higher demand for ungeared scooters in the urban and rural markets. However, Bajaj Auto is much better positioned then TVS and Hero Honda.
Bajaj Auto is planning to re-enter the ungeared scooters segment with superior technology products.
In Bajaj Auto if one look at in the recent past any case of demerger and restructuring has led to a tremendous value unlocking especially for this company which has got variety of divisions like financial services, instruments, investments, insurance apart from its core auto mobile business. So once this restructuring is completed, the some parts would actually be a lot more than what the current value is. So the investors should hold on at this current levels.

STOCKS TO WATCH UNDER 2-WHEELER SEGMENT

Bajaj Auto Limited
TVS Motors
Kinetic Engineering
Hero Honda

HOLD :- Bajaj Auto Limited at current levels.

SELL :- TVS Motors ,Hero Honda and Kinetic Engineering at current
levels.

THREE WHEELER SEGMENT

Passenger vehicles sales in the country will reach 2.1 million units by the Fiscal Year 2010 as economic growth and rising incomes persuade more people to buy cars. 4-wheeler and passenger car segment will see better growth than 2-wheeler segment.
Commercial vehicles market is expected to grow at CAGR of 27% with volumes expected to touch about 9 lakh units by 2010.
With an estimated 40% commercial vehicles plying on the roads 10 year old, demand for Heavy Commercial Vehicles is expected to grow by 6%-8% from Fiscal Year 2008 onwards.
Utility vehicle segment is expected to grow at 6% - 8% in long term.

STOCKS TO WATCH 4-WHEELER SEGMENT

TATA Motors
Maruti Udhyog Limited
Ashok Leyland
Mahindra and Mahindra
Eicher Motors

HOLD :- M & M, Tata Motors and Maruti Ltd.

SELL:- Ashok Leyland

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		Date: May 16, 2007 Review of Automobile Sector We are pleased to send you review of Automobile Sector INDIAN AUTOMOBILE SECTOR The Indian automobile market is plagued with excess capacity. Demand is largely cyclical in nature and dependent upon economic growth and per capita income. In the first half of 2007, low interest rates was a major demand driver as it brought down the cost of owning a vehicle. But in the second half, the demand slackened as interest rates firmed up. Rising interest rates may impact passenger car sales in the short to medium term. Further increase in interest rate is also likely to impact the sales volume. TWO WHEELER SEGMENT According to industry experts Indian automobile sales will grow at CAGR of 9.5% to 1,30,008 millions by 2010. Market size is expected to grow by 12%-15%. TVS, Hero Honda and Honda are poised to benefit from higher demand for ungeared scooters in the urban and rural markets. However, Bajaj Auto is much better positioned then TVS and Hero Honda. Bajaj Auto is planning to re-enter the ungeared scooters segment with superior technology products. In Bajaj Auto if one look at in the recent past any case of demerger and restructuring has led to a tremendous value unlocking especially for this company which has got variety of divisions like financial services, instruments, investments, insurance apart from its core auto mobile business. So once this restructuring is completed, the some parts would actually be a lot more than what the current value is. So the investors should hold on at this current levels. STOCKS TO WATCH UNDER 2-WHEELER SEGMENT Bajaj Auto Limited TVS Motors Kinetic Engineering Hero Honda HOLD :- Bajaj Auto Limited at current levels. SELL :- TVS Motors ,Hero Honda and Kinetic Engineering at current levels. THREE WHEELER SEGMENT Passenger vehicles sales in the country will reach 2.1 million units by the Fiscal Year 2010 as economic growth and rising incomes persuade more people to buy cars. 4-wheeler and passenger car segment will see better growth than 2-wheeler segment. Commercial vehicles market is expected to grow at CAGR of 27% with volumes expected to touch about 9 lakh units by 2010. With an estimated 40% commercial vehicles plying on the roads 10 year old, demand for Heavy Commercial Vehicles is expected to grow by 6%-8% from Fiscal Year 2008 onwards. Utility vehicle segment is expected to grow at 6% - 8% in long term. STOCKS TO WATCH 4-WHEELER SEGMENT TATA Motors Maruti Udhyog Limited Ashok Leyland Mahindra and Mahindra Eicher Motors HOLD :- M & M, Tata Motors and Maruti Ltd. SELL:- Ashok Leyland