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CD Equisearch
Lumax Ind (Hold)
CMP: ₹347.10
Target: ₹416
During Q3 FY15, volume trends in the automotive sector were mixed with M&HCV (medium and heavy commercial vehicles) and passenger cars showing robust growth, while steep declines were seen in the tractor and LCV (large commercial vehicle) segments. Two-wheelers and UVs (utility vehicles) saw a modest trend. At the ground level, consumer sentiment has turned positive which was supported by the fall in petrol and diesel prices. Additional trigger during the quarter was the rollback of excise duty cuts from January. Not only did the manufacturers push up the inventories to get the benefit of lower excise duties, but strong consumer buying was also seen during the quarter (particularly December 2014).
On the negative side, The growing number of Free and Preferential Trade Agreements being signed by India with countries such as Thailand, Singapore and other ASEAN countries will hurt the cost competitiveness of domestic companies as Indian players pay significantly higher duties than their Asian counterparts. Therefore, Indian companies might lose out on big orders if the duty structure is not rationalised.
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