DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION ™ Client-Driven Solutions, Insights, and Access 29 August 2012 Asia Pacific/India Equity Research Auto Parts & Equipment (Auto) / MARKET WEIGHT India Two Wheeler Sector THEME Riding the world Figure 1: Bajaj’s exports can grow at 20% CAGR on market share gains & high market growth in the low penetration countries: from 1.2m to 3m in 5 years Bajaj's Mkt Share HIGH LOW 2W penetration in market MEDIUM LOW Nigeria, East & Central Africa West Africa South Asia, Colombia, Peru, Philippines Argentina, Chile, Rest of Latin America 0.03 0.4 0.55 1.3 0.55 0.06 0.8 0.5 Grey Bubble: Bajaj's FY12 volumes (Mn units), Blue Bubble: FY17 volumes Source: UN Comtrade, Credit Suisse estimates. ■ Putting India on the global map. Our detailed analysis of the global two- wheeler market suggests that Bajaj Auto, India’s largest exporter, could easily grow its exports volumes at >20% CAGR for the next five years. We reckon FY14 will be a big year for Bajaj’s exports as it stands to gain vis-à- vis its Chinese competitors on the back of a weak INR and rising labour costs for its Chinese counterparts destroying their pricing advantage. ■ Africa, Latin America—opportunity beckons. We have analysed the two key export markets viz. Africa and Latin America and divided them into four buckets on the basis of penetration and its current market share. We believe whilst market growth will drive volumes in Nigeria and East & Central Africa, market share gains will be the key catalyst for growth in the Latin American countries of Argentina and Chile. West Africa, despite its relatively smaller size, presents an opportunity as it is a region with both low market share and low penetration. ■ Bajaj Auto, our top pick in the sector: - We raise our FY14 estimates for Bajaj Auto by 5% and increase target price to Rs2,152. Though we continue to like Hero Motocorp from a long-term perspective given the near term risk on volumes and margins, we have reduced our FY13/FY14 estimates by ~6% and downgraded Hero Motocorp to NEUTRAL. Research Analysts Jatin Chawla 91 22 6777 3719 [email protected]Akshay Saxena 91 22 6777 3825 [email protected]
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DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION™
Client-Driven Solutions, Insights, and Access
29 August 2012
Asia Pacific/India
Equity Research
Auto Parts & Equipment (Auto) / MARKET WEIGHT
India Two Wheeler Sector THEME
Riding the world
Figure 1: Bajaj’s exports can grow at 20% CAGR on market share gains & high
market growth in the low penetration countries: from 1.2m to 3m in 5 years
(3) Eastern and Central Africa – third largest and the fastest growing market in the region
consisting of countries like Angola, Kenya, Tanzania, Uganda, Democratic Republic of
Congo and Ethiopia
(4) Northern Africa – being in Islamic region we reckon this region is not comfortable with
the idea of a motorcycle as a taxi so demand here is largely for personal use only.
Egypt is the largest market here, followed by Morocco and Algeria.
(5) Southern Africa – very small market with South Africa being the country with potential
but a country where two-wheelers are still not widely accepted as a respectable
means of transport
Figure 27: Split of the African two-wheeler market Figure 28: Indians have gained share in the past few years
Nigeria, 1.33, 38%
East & Central Africa, 0.77,
22%
West Africa, 1.02, 29%
North Africa,
0.29, 8%
South African region, 0.11,
3%
84% 87% 87% 83%74% 77% 78%
3%2% 4% 9%
17%16% 17%
0%
20%
40%
60%
80%
100%
2005 2006 2007 2008 2009 2010 2011
Mkt Share in Africa for Chinese Indians Japanese
Source: UN Comtrade, Credit Suisse estimates Source: UN Comtrade, Credit Suisse estimates
Figure 29: Given low penetration, the entire region has a
lot of potential
Figure 30: East & Central Africa and West Africa have
driven growth in past five years
3.4%
0.8%
2.5%
1.0%
0.7%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Nigeria East & CentralAfrica
West Africa North Africa South Africanregion
2W penetration/ population (%)
13%
39%
35%
11%
2%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Nigeria East & CentralAfrica
West Africa North Africa South Africanregion
5 year CAGR growth in 2W market
Source: UN Comtrade, Credit Suisse estimates Source: UN Comtrade, Credit Suisse estimates
29 August 2012
India Two Wheeler Sector 12
Nigeria
Not surprisingly, given its population, Nigeria is the largest two-wheeler market at
~US$750 mn in Africa with sales exceeding 1.3mn in 2011. As mentioned earlier,
motorcycle taxis are referred as Okadas in Nigeria, the name originating from one of
Nigeria’s popular local airline Okada Air because, like the airline, motorcycles could
manoeuvre through heavy traffic and take their passengers to their destinations in a timely
manner. The Nigeria market has witnessed a 13% CAGR in the past five years and with a
penetration of 3.4%; there is clearly still a lot of growth left.
Figure 31: High population, inadequate public transport and rising income levels make Nigeria an attractive market
GDP per capita (PPP terms
in USD)
GDP per capita
(USD)
GDP (Bn USD) -
2011
5 Yr GDP growth
(%)
10 yr growth Population (Mn)
Nigeria 2,578 1,490 239 7% 9% 160
Source: IMF Databank, Credit Suisse estimates
Figure 32: Nigeria is the largest market in Africa Figure 33: Indians gaining share from Chinese
-45%
-30%
-15%
0%
15%
30%
45%
0
100
200
300
400
500
600
700
800
2006 2007 2008 2009 2010 2011
(US
$ m
n)
Nigeria Mkt Size YoY growth (RHS)
1% 4%10%
25% 22% 23%
98% 95%90%
75% 78% 76%
0%
20%
40%
60%
80%
100%
2006 2007 2008 2009 2010 2011
Mkt Share in Nigeria: Indians Chinese Japanese & others
Source: UN Comtrade, Credit Suisse estimates Source: UN Comtrade, Credit Suisse estimates
Given the fact that motorcycles are largely used as taxis here, cheap motorcycles are the
norm here and hence Chinese dominate the market. In fact till 2005, they were virtually the
only players in the market. Bajaj Auto entered the Nigerian market in 2005 and has had
great success in the past five years. Its market share has already reached ~25% despite
the fact that its vehicles are almost 50% more expensive than the Chinese bikes. Even the
Nigerians have started appreciating Bajaj’s quality and realising that though the upfront
cost is higher with a Bajaj vehicle, the total cost of ownership on account of the lower
maintenance and better mileage is lower than that of Chinese bikes. The Boxer brand with
its larger seats is suitable for usage as a taxi. Bajaj has recently launched the Boxer 150,
which has been well received by the market.
However, in the past couple of years, given the fact that a lot of the okadas were being
used by people committing crimes and the increase in the number of accidents, various
state governments have started banning commercial use of motorcycles. In March 2012,
Lagos, which is the largest market for such commercial motorcycles, banned their use
from a large part of the town. Various other states like Kwara, Bayelsa and Jos have also
imposed a temporary ban on commercial motorcycles in order to regularise the business.
But with the fact that motorcycles for personal use are just starting to grow we reckon
volumes in this market can continue to grow at a 10% CAGR in this market.
Motorcycles are primarily
used as taxis; hence, cheap
Chinese motorcycles
dominate
29 August 2012
India Two Wheeler Sector 13
Western Africa
With a combined population of ~130 mn and a penetration of only 2.5%; this region too
has a lot of potential, going forward. Given their income levels and their population, we
reckon Ghana and Ivory Coast could be large countries. In the export/import data Togo,
which is a small country with population of only 7.1 mn, stands out as the largest importer
of motorcycles within Western Africa. In our view, this is because of the fact that Lomé (the
capital of Togo) being the only deep-water port in the region serves as the unofficial hub
for transit trade within the region. Togo serves as a transit market for the larger economies
of Nigeria, Ghana and for land-locked Burkina Faso and Niger. This region is completely
dominated by Chinese manufacturers who have a >90% share of the market. Like in
certain states of Nigeria, even Ghana has banned the use of Okadas in July 2012; this, we
reckon, could put pressure on motorcycle volumes in the near term.
Figure 34: Ghana and Ivory Coast are big potential 2W market countries in West Africa region
GDP per capita (PPP
terms in USD)
GDP per capita
(USD)
GDP (Bn USD) -
2011
5 Yr GDP growth
(%)
10 yr growth Population (Mn)
Ghana 3,083 1,529 37 8% 7% 24
Ivory Coast 1,590 1,062 24 1% 1% 23
Senegal 1,871 1,076 14 4% 4% 13
Mali 1,128 669 11 4% 5% 16
Burkina Faso 1,466 664 10 5% 6% 15
Benin 1,481 737 7 4% 4% 10
Niger 771 399 6 4% 5% 15
Guinea 1,083 492 5 2% 3% 11
Togo 899 506 4 3% 3% 7
Source: IMF Databank, Credit Suisse estimates
Figure 35: Western Africa has seen strong growth in 2011 Figure 36: A market dominated by Chinese players
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
0
100
200
300
400
500
600
2006 2007 2008 2009 2010 2011
(US
$ m
n)
Western Africa market size YoY growth (RHS)
1% 1% 1% 1% 3% 4%
91% 92% 91% 92% 92% 92%
8% 6% 8% 7% 6% 5%
0%
20%
40%
60%
80%
100%
2006 2007 2008 2009 2010 2011
Mkt Share in West Africa : Indians Chinese Japanese & others
Source: UN Comtrade, Credit Suisse estimates Source: UN Comtrade, Credit Suisse estimates
Eastern and Central Africa
With a combined population of ~330 mn and with penetration at a paltry 0.8%, we reckon
this region has the highest potential. The region with volumes of ~0.8mn units has been
the fastest growing region with a 40% CAGR in the last five years. Whilst the data
suggests that the Japanese and others have lost market share here, the fact is that the
Chinese and the Indian players have gained market share. So whilst the share of
Japanese bikes has remained constant at ~US$30mn, the share of Chinese and Indian
bikes has increased significantly in the last few years to ~US$270mn and US$120mn
respectively. This suggests that like in other markets a part of the growth here as well has
come from the motorcycle taxi segment where the Chinese bikes are very popular. For the
Chinese are near dominant
in West Africa
East & Central Africa are
marked by low penetration
though income levels are
also low
29 August 2012
India Two Wheeler Sector 14
Indian players, Kenya, Uganda and Angola are strong markets with market share >30%
and they have done well in grabbing ~15% share in markets like Tanzania and Ethiopia as
well. We believe success in this region will be the key driver for volumes for the Indian
players.
Figure 37: Though income levels are comparatively low in East & Central Africa; 2W penetration is very low
GDP per capita
(PPP in USD)
GDP per capita
(USD)
GDP (Bn USD) -
2011
5 Yr GDP growth
(%)
10 yr growth Population (Mn)
Angola 5,895 5,144 101 9% 11% 20
Cameroon 2,257 1,230 26 3% 3% 21
Democratic Congo 348 216 16 6% 6% 73
Central African Republic 768 456 2 3% 1% 5
Kenya 1,746 851 35 4% 4% 41
Ethiopia 1,093 360 31 10% 8% 87
Tanzania 1,515 553 23 7% 7% 42
Uganda 1,317 478 17 7% 8% 35
Source: IMF Databank, Credit Suisse estimates
Figure 38: Robust growth in markets in last few years Figure 39: Indians have established strong presence
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0
50
100
150
200
250
300
350
400
450
2006 2007 2008 2009 2010 2011
(US
$ m
n)
East & Central Africa Mkt Size YoY growth (RHS)
9% 10%20%
29% 28% 29%
58%63%
60%
55% 62% 64%
33%27%
19% 15% 11% 8%
0%
20%
40%
60%
80%
100%
2006 2007 2008 2009 2010 2011
Mkt Share in East & Central Africa: Indians Chinese Japanese & others
Source: UN Comtrade, Credit Suisse estimates Source: UN Comtrade, Credit Suisse estimates
Northern Africa
Unlike the other parts of Africa, motorcycles are not used as taxis in this region, probably,
in our view, on account of the fact that most of these countries are Islamic countries and it
would not be viewed as proper to have motorcycles as a means of public transport. Given
the relatively higher income levels in this region, a large part of the sale is bikes sold for
personal use. However, these regions do have tricycles (three-wheelers) as a means of
public transport. Egypt is the second largest three-wheeler export market from India. In
some cities of Sudan, the usage of boda-boda (commercial motorcycles are referred by
this name here) has just started.
Figure 40: While high GDP per capita in Northern Africa, 2W usage restricted as can’t be used as taxis
GDP per capita (PPP
terms in USD)
GDP per capita
(USD)
GDP (Bn USD) -
2011
5 Yr GDP growth
(%)
10 yr growth Population (Mn)
Egypt 6,540 2,970 236 17% 9% 79
Algeria 7,333 5,304 191 10% 13% 36
Morocco 5,052 3,083 99 9% 10% 32
Sudan 2,726 1,982 65 13% 17% 33
Tunisia 9,478 4,351 46 6% 8% 11
Libya 5,787 5,691 37 -8% 1% 6
Source: IMF Databank, Credit Suisse estimates
Both Northern and Southern
Africa do not have a strong
2W market
29 August 2012
India Two Wheeler Sector 15
Figure 41: Egypt is the only big 2W market in region Figure 42: Chinese dominate here too
-50%
0%
50%
100%
150%
200%
250%
300%
0
20
40
60
80
100
120
140
160
180
2006 2007 2008 2009 2010 2011
(US
$ m
n)
North Africa market size YoY growth (RHS)
2% 1% 1% 3% 6% 10%
92% 95% 94% 87%92% 88%
5% 4% 5% 9%3% 2%
0%
20%
40%
60%
80%
100%
2006 2007 2008 2009 2010 2011
Mkt Share in North Africa : Indians Chinese Japanese & others
Source: UN Comtrade, Credit Suisse estimates Source: UN Comtrade, Credit Suisse estimates
Southern Africa
This region is not really a motorcycle market currently. Despite the fact that it has a
population of 90 mn and a reasonably high GDP per capita in most countries, this region
has not really taken to motorcycles as motorcycles are generally perceived to be unsafe
from both a crime and accidents point of view. Also, it has never been considered
prestigious to own a motorcycle in this region and, hence, people prefer to purchase an
old car rather than a new motorcycle. But now given the fact that the black middle class is
emerging, Indian players have started efforts to develop a two-wheeler market in South
Africa as well; with very limited success so far though. Bajaj Auto has just opened four
dealerships around Johannesburg and started efforts to educate people about the benefits
of using a motorcycle.
Income inequality is the highest in the world as Namibia, South Africa and Botswana are
all in the top five in rankings of all countries by Gini co-efficient which measures income
inequality. And thus despite high per capita incomes, the lower income class in these
countries cannot afford a two-wheeler. We believe once income inequality starts coming
down and the income levels of those at the bottom also start improving; motorcycle
volumes in this region too will pick up. As of now, we do not assume any volumes for the
next five years from these markets.
Figure 43: GDP per capita high in the region but extremely small 2W market due to large income inequalities
GDP per capita
(PPP terms in USD)
GDP per capita
(USD)
GDP (Bn USD) -
2011
5 Yr GDP growth
(%)
10 yr growth Population (Mn)
South Africa 10,973 8,066 408 3% 4% 51
Zambia 1,611 1,414 19 7% 6% 14
Botswana 16,030 9,481 18 3% 4% 2
Mozambique 1,085 583 13 7% 8% 22
Namibia 7,363 5,828 12 4% 5% 2
Zimbabwe 487 741 9 0% -4% 13
Source: IMF Databank, Credit Suisse estimates
29 August 2012
India Two Wheeler Sector 16
Figure 44: Southern Africa is smallest 2W market in Africa Figure 45: Chinese have comparatively smaller presence
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
0
10
20
30
40
50
60
70
80
2006 2007 2008 2009 2010 2011
(US
$ m
n)
Southern Africa market size YoY growth (RHS)
8% 5%11% 13% 17% 14%
31% 36%
40%26%
30%49%
61% 59%49%
61%52%
37%
0%
20%
40%
60%
80%
100%
2006 2007 2008 2009 2010 2011
Mkt Share in Southern Africa : Indians Chinese Japanese & others
Source: UN Comtrade, Credit Suisse estimates Source: UN Comtrade, Credit Suisse estimates
Three-wheelers exports mitigate 2W ban risk
One of the key risks to Africa 2W export story would be the imposition of bans on use of
motor-cycles as taxis as has happened recently in select cities of Nigeria, Ghana, etc. We
believe that at margin it wouldn’t hurt Indian players like Bajaj much. Not only will the shift
of motorcycles usage from taxis to personal vehicles will continue happening, this ban
would also lead to a spurt in 3W demand for commercial purposes. In the 3W space, Bajaj
is already on a very strong footing in Africa. In some countries like Egypt it is the only
player in the 3W space while in countries like Tanzania, Ethiopia, Bajaj’s vehicles are so
popular that 3W’s are in fact known by the name Bajaj.
Total 3W exports from India were ~US$500 mn in 2011 with Bajaj having a ~90% share.
Among that while exports to neighbouring countries like Sri-Lanka, Bangladesh constituted
a big percentage; 3W exports to Africa were roughly 25% of total with Egypt, Nigeria the
key countries. As of now 3W’s are particularly prevalent in Muslim dominant areas like
North Nigeria where motorcycles can’t be used for taxi purposes. With most of the
Northern Africa region falling in this category, it would continue to drive Bajaj’s 3W exports.
Figure 46: Sri-Lanka, Egypt and Nigeria are biggest 3W export markets for India
Sri-Lanka43%
Egypt17%
Nigeria12%
Bangladesh8%
Peru7%
Sudan4%
Guatemala2% Ethopia
2%
Mexico1% Tanzania
1%
Colombia1% Others
2%
Break-up of India's 3W exports
Source: Company data, Credit Suisse estimates
Ban on motorcycles usage
as Taxis wouldn’t hurt Indian
players like Bajaj much
because it would lead to a
spurt in 3W sales
29 August 2012
India Two Wheeler Sector 17
Latin America ex Brazil—market share gains is the story here Overall, the Latin American export market ex Brazil is similar in size to the African market
at ~US$2bn. Brazil, which is the largest market in the region with an annual demand of 2
mn units is currently dominated by Honda with an 82% market share which has a local
production base in Brazil as well. With an overall population of 340 mn units (one-third of
Africa), the potential opportunity in Latin America is not as large as the one in Africa.
However, Latin America is already in the midst of a very strong boom in two-wheelers and
hence represents a good near-term opportunity.
Figure 47: GDP per capita of most countries in Latin America is high
GDP per capita (PPP
terms in USD)
GDP per capita
(USD)
GDP (Bn USD) -
2011
5 Yr GDP growth
(%)
10 yr GDP growth Population (Mn)
Argentina 17,516 10,945 448 7% 6% 41
Bolivia 4,789 2,315 25 5% 4% 11
Brazil 11,769 12,789 2493 4% 4% 195
Chile 17,222 14,278 248 4% 4% 17
Colombia 10,249 7,132 328 4% 5% 46
Dominican 9,287 5,639 57 6% 6% 10
Ecuador 8,492 4,424 66 4% 5% 15
Guatemala 5,070 3,182 47 3% 3% 15
Mexico 14,610 10,153 1155 1% 2% 114
Paraguay 5,413 3,252 21 5% 4% 7
Peru 10,062 5,782 174 7% 6% 30
Uruguay 15,113 13,914 47 6% 4% 3
Venezuela 12,568 10,611 316 3% 3% 30
Source: IMF Databank, Credit Suisse estimates
Latin American countries are a bit of a contradiction in the sense that with GDP per capita
at ~US$10,000, countries normally start moving away from two-wheelers to passenger
cars. Also, a number of these countries already have a higher passenger car penetration
than two-wheeler penetration. But unlike the other developing countries in the world they
never went through the phase where two-wheelers first took off, got saturated and then
people started moving to cars. We reckon the reason for the same is that there is a very
wide income inequality in these countries. Thus, despite these countries being “middle-
income” countries, ~40% of the population in these countries is poor.
Income inequality in most countries went up significantly in the 1980s with the reforms and
then again in 1990s with the liberalisation policies. However, there has been considerable
progress made in reducing inequality in a number of these countries since the early 2000s
on the back of the skill premium coming down and higher investments by governments in
improving standards of those at the bottom of the pyramid. Most of the countries have
witnessed strong growth and hence a surge in employment in the 2000s has also helped.
This reduction in inequality has resulted in the emergence of a strong middle class and
this consequently has resulted in a strong demand for two-wheelers. For example, The
Argentinian two-wheeler market today is 6x of what it used to be in 2005 and is the second
largest importer of two-wheelers globally after Nigeria.
Most countries in Latin
America are marked by high
income inequality
29 August 2012
India Two Wheeler Sector 18
Figure 48: Income inequality among the largest in the
world
Figure 49: However it has improved greatly over the years
9
10
13
18
21
22
30
31
33
43
45
0 10 20 30 40 50
Bolivia
Colombia
Brazil
Paraguay
Mexico
Chile
Ecuador
Peru
Dominican Rep
Argentina
Venenzuela
Gini coefficient ranking among 150 countries
40
50
60
70
2002 2003 2004 2005 2006 2007 2008 2009 2010
Gini coefficient for Argentina Peru Colombia Brazil
Source: World Bank, Credit Suisse estimates Source: World Bank, Credit Suisse estimates
Brazil, which is the biggest market in Latin America, is completely dominated by Japanese
players (over 90% market share) so our analysis is focused on the rest of Latin America
(ex Brazil). The region has witnessed a 17% CAGR in volumes in the past five years with
most markets barring Guatemala growing in double digits during the period. Peru and
Argentina were the fastest growing markets during the period. Unlike the African region,
motorcycles are not at all used as taxis in this region and hence all the demand is for
personal usage. Given this, the traditional penetration based analysis can be used to
gauge the potential of the region. Overall, as a region, the penetration levels stand at only
5%; assuming an average household size of four for the region the household penetration
is only 20% and thus it still has another decade of growth should the middle income class
continue to grow.
Figure 50: Market has grown at 17% 5 year CAGR Figure 51: Most markets grew in healthy double digits
-60%
-40%
-20%
0%
20%
40%
60%
80%
0
500
1,000
1,500
2,000
2,500
2006 2007 2008 2009 2010 2011
(US
$ m
n)
Latin America ex Brazil market size YoY growth (RHS)
23%
32%
11%
14%
6%
19%
19%
0% 5% 10% 15% 20% 25% 30% 35%
Argentina
Peru
Colombia
Venezuela
Guatemala
Paraguay
Chile
5 Yr CAGR growth (%)
Source: UN Comtrade, Credit Suisse estimates Source: UN Comtrade, Credit Suisse estimates
29 August 2012
India Two Wheeler Sector 19
Figure 52: Penetration levels still comparatively low
7%
3%
4%3%
3%
8%
2%
8%
3%
5%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
Argentina Peru Colombia Venezuela Guatemala Paraguay Chile Brazil Dominican Overall
2W penetration/ population (%)
Source: UN Comtrade, Credit Suisse estimates
Apart from Brazil, the other large markets in the region are Argentina, Colombia,
Venezuela and Peru. Out of these markets, Indian players have a high share only in
Colombia whereas the Chinese dominate the other markets particularly Venezuela and
Peru. The Japanese players (Honda) have a strong presence in Argentina with a 25%
market share as they export products to Argentina from their Brazilian plants.
Figure 53: Argentina, Colombia the biggest markets Figure 54: Indians have high share in Peru, Colombia
574
191
392
222
82102
76
32
0
100
200
300
400
500
600
700
Argentina Peru Colombia Venez Guatem Parag Chile Dominican
Mkt Size (Mn USD)
5%
15%
57%
0%
32%
0%
3%
3%
69%
82%
36%
96%
63%
98%
83%
79%
0% 20% 40% 60% 80% 100% 120%
Argentina
Peru
Colombia
Venezuela
Guatemala
Paraguay
Chile
Dominican
Chinese Mkt Share Indians Mkt Share
Source: UN Comtrade, Credit Suisse estimates Source: UN Comtrade, Credit Suisse estimates
Indian players have gained market share in most markets. Whilst they have managed to
consolidate strong positions in Colombia (30% to 60% MS, both Hero and Bajaj export
here) and Guatemala (12% to 30% MS), they have managed to enter the markets of
Argentina, Brazil, Peru and Chile and grab single digit market shares. Growth in Latin
America would be a function of how the Indian players can take share from their Chinese
counterparts in these countries. Except for Brazil where Honda is dominant with a 82%
market share, we reckon Indian players can increase their share from 3% currently to 20%
in the next five years.
Indians have yet to ramp up
fully in key Latin American
markets like Argentina,
Chile, and Venezuela
29 August 2012
India Two Wheeler Sector 20
Figure 55: Market share for Indians have gradually grown over the years
9%4% 5% 9% 11%
16%
65% 72% 75% 65%72%
71%
26% 23% 20%26%
17%12%
0%
20%
40%
60%
80%
100%
2006 2007 2008 2009 2010 2011
Mkt Share in Latin America ex Brazil : Indians Chinese Japanese & others
Source: UN Comtrade, Credit Suisse estimates
South Asia ex India
Excluding India, South Asia’s size is 1.5 mn units. Pakistan is over half of this market and
given the history between two nations, Indian players never had a presence in this
country. Pakistan was earlier completely dominated by Japanese players but Chinese
players have slowly established a foothold and now the market is equally divided between
the Japanese and Chinese players.
Figure 56: Pakistan is the biggest 2W market given its population and GDP
GDP per capita (PPP
terms in USD)
GDP per capita
(USD)
GDP (Bn USD) -
2011
5 Yr GDP growth
(%)
10 yr GDP growth Population (Mn)
Bangladesh 1,693 678 113 6% 6% 167
Nepal 1,328 653 19 4% 4% 28
Pakistan 2,787 1,201 211 4% 5% 175
Sri Lanka 5,674 2,877 59 7% 6% 21
Source: Company data, Credit Suisse estimates
The rest of the markets – Bangladesh, Nepal and Sri-Lanka – are largely dominated by
India. While Chinese have a reasonable presence in Bangladesh, sales in both Sri-Lanka
and Nepal are nearly exclusively by Indians. Sri-Lanka has the highest per capita GDP,
hence not surprisingly has the highest two-wheeler penetration. Among these countries,
while Bangladesh is the greatest potential market with high population and extremely low
penetration, its income levels and per capita GDP is also quite low. The two-wheeler
market in all these countries have grown in double digits in last five years with highest
growth in Bangladesh and Nepal (given the low base).
Indians have no presence in
Pakistan but are dominant in
other South Asian markets
29 August 2012
India Two Wheeler Sector 21
Figure 57: Pakistan is bulk of 2W market in South Asia
excluding India
Figure 58: Other than Pakistan, Indian players are
dominant in all other south Asian countries
SL18%
Pak64%
Bangladesh15%
Nepal3%
0%
20%
40%
60%
80%
100%
120%
Sri-Lanka Nepal Bangladesh Pakistan
Mkt Share Indians Japanese/ Chinese
Source: UN Comtrade, Credit Suisse estimates Source: UN Comtrade, Credit Suisse estimates
Figure 59: All markets have grown in double digits in last
five years
Figure 60: Sri-Lanka’s 2W penetration is high given the
per capita GDP levels – Nepal and Bangladesh far behind
0%
5%
10%
15%
20%
25%
30%
Sri-Lanka Nepal Bangladesh
5 Yr CAGR growth (%)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
Sri-Lanka Nepal Bangladesh
2W penetration/ population (%)
Source: UN Comtrade, Credit Suisse estimates Source: UN Comtrade, Credit Suisse estimates
29 August 2012
India Two Wheeler Sector 22
Export opportunity is massive Both Africa (~80% MS) and Latin America ex Brazil (~72% MS) are currently dominated by
Chinese players. Whilst the Indian players have been gaining share from the Chinese on
account of their better quality, we reckon market share gains for the Indian players will
accelerate over the next few years as pricing – the only plank on which the Chinese score
over the Indians; will work in favour of the Indian companies.
Indian players to gain share from Chinese
The low-cost motorcycle market globally has been dominated by the Chinese for the past
few years. However, Chinese exports have declined in the 1HCY12 on account of the fact
that China’s price advantage is starting to disappear. The key reasons for the same are (i)
an increase in production costs and (ii) currency.
Figure 61: Volume growth has come off
-60%
-40%
-20%
0%
20%
40%
60%
90 ml <disp ≤ 100ml 100 ml <disp ≤ 110ml 110 ml <disp ≤ 125ml 125 ml <disp ≤ 150ml
YoY change in volumes in 2010 2011 May-12
Source: China motorcycle association, Credit Suisse estimates
Increase in Production costs is reducing competitiveness…
One of the key components of production costs for motorcycles is labor costs, especially in
the supply chain. In the case of China, a large part of the supply chain is located in the
Chongqing province. As per certain estimates, Chongqing province witnessed a ~45%
increase in average labor costs from RMB1,866/month to RMB2,671/month. As a result,
for similar kind of products the Chinese motorcycle producers had to increase their prices
by ~15% in the 1HCY12.
Labour costs have
increased greatly in China
29 August 2012
India Two Wheeler Sector 23
Figure 62: Chinese vehicle export prices are up ~25% in the last two years
-10%
-5%
0%
5%
10%
15%
20%
90 ml <disp ≤ 100ml 100 ml <disp ≤ 110ml 110 ml <disp ≤ 125ml 125 ml <disp ≤ 150ml
YoY increase in realisations in 2010 2011 May-12
Source: China motorcycle association, Credit Suisse estimates
…RMB appreciation too is hurting
Whilst the RMB has been appreciating against the USD, the currency of most of Chinese
export markets has been declining against the USD, making the vehicles even more
expensive for them. On the contrary, the Indian currency which has been one of the worst
currencies globally has declined against most of these countries; thereby helping the
business case for Indian manufacturers.
Figure 63: While the Indian rupee has depreciated against most countries, Chinese Yaun
has appreciated against the same
-20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30%
Nigeria
West African Franc
Uganda
Tanzania
Kenya
Egypt
Sri-Lanka
Bangladesh
Philippines
Argentina
Colombia
Peru
USA
Chinese Yaun depreciation Indian Rupee depreciation vs major countries
Source: Company data, Credit Suisse estimates
29 August 2012
India Two Wheeler Sector 24
Bajaj Auto will be the key beneficiary
Within the Indian players, Bajaj, on account of the fact that it has already made significant
inroads into these markets and already has a successful export strategy in place, is likely
to gain the most. We have divided the export opportunity into four segments on the basis
of market growth and market share and analysed each segment.
Figure 64: Bajaj’s export volumes have jumped 6x in the
last six years
Figure 65: Given Sri-Lanka’s high share in three-wheeler
exports, growth here has been dependent on Sri-Lanka
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12
Bajaj 2W exports Growth YoY(RHS)
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12
Bajaj 3W Exports Growth (%)
Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates
Figure 66: Africa already accounts for ~50% of Bajaj’s two-wheeler export volumes
South Asia18%
Nigeria26%
East & Central Africa17%
Rest of Africa3%
Latin America20%
Philippines, South East
Asia10%
Others7%
Share of Bajaj's 2W exports
Source: Company data, Credit Suisse estimates
Low penetration, mid market share markets
We believe the Western African region falls in this category. In this region, the key
competition for Bajaj Auto comes from the Chinese competitors and for reasons outlined
above we reckon Bajaj will be able to win market share here. We believe Bajaj can
increase its market share from ~3% currently to ~20% in the next five years and given the
fact that the market penetration is low, the market also has the potential to grow at 15%
CAGR over the next five years. Hence, Bajaj’ exports to this region can increase from 30k
p.a. today to 400k p.a. in the next five years.
29 August 2012
India Two Wheeler Sector 25
Low penetration, high market share markets
We believe that Eastern and Central Africa and Nigeria fall into this category. Motorcycles
are very popular in this part of the African region but largely as motorcycle taxis and since
entering in 2004 Bajaj was able to increase its market share from 20% within five years.
Though here too the Chinese are the main competition and there is a potential for Bajaj
Auto to further increase market share, we have assumed a marginal market share
improvement from 28% to 30%. Given the increase incidence of Nigeria banning
motorcycle taxis, we have assumed a 10% CAGR in volumes in Nigeria vs a 20% CAGR
in volumes in Eastern and Central Africa where penetration at 0.8% is very low. However,
the ban on motorcycle taxis presents a great opportunity for Bajaj’s three-wheeler exports.
Already, a number of these states which have banned three-wheelers have started
replacing motorcycle taxis with tricycles from Bajaj Auto; hence three-wheelers can be a
big opportunity here. Overall, we expect Bajaj’s motorcycle exports in this region to
increase from 550k p.a. currently to 1.3mn units p.a. in the next five years.
Mid penetration, low market share markets
These are countries where penetration is reasonably high but not high enough for growth
to have tapered out; hence we expect these countries to grow at a 8% CAGR over the
next five years. But in these countries, Bajaj’s share is very low and hence growth will be
boosted by market share gains. We have been careful not to select countries where the
Japanese are dominant and the main completion is with the Chinese manufacturers. We
would put Latin American countries like Argentina, Mexico, Venezuela and Chile in this
bucket. We assume Bajaj can increase market share from 3% to 20% and expect its
volumes to grow from 60k currently to 500k in the next five years.
Mid penetration, high market share markets
These are markets where penetration is reasonably high and with an already high market
share we don’t expect any gains for Bajaj Auto. In most of these markets, Bajaj Auto is
already the number one player and hence it won’t be easy for Bajaj to grow faster than the
market. These markets include South Asian markets like Sri Lanka, Bangladesh, Nepal,
Latin American markets like Colombia, Guatemala, Peru and South East Asian markets
like the Philippines. These markets clearly are not saturated; however, we believe that with
penetration at ~5% in most of these markets vs ~2.5% for the lower penetration markets
volumes would grow at an 8% CAGR in the next five years. We don’t assume any market
share increases for Bajaj Auto in these markets as either it already has a high share or the
main competition is from the Japanese players. We expect volumes in this segment to
increase from ~550k to ~800k over the next five years.
Figure 67: Penetration still low in many potential areas Figure 68: Bajaj has not yet penetrated some markets
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
South Asia Nigeria East &CentralAfrica
WestAfrica
North &Southern
Africa
Philip, LatAm high
share
LatAmerica
low share
2W penetration
0%
10%
20%
30%
40%
South Asia Nigeria East &CentralAfrica
WestAfrica
North &Southern
Africa
Philip, LatAm high
share
LatAmerica
low share
Bajaj's current market share
Source: UN Comtrade, Credit Suisse estimates Source: UN Comtrade, Credit Suisse estimates
29 August 2012
India Two Wheeler Sector 26
Figure 69: Large growth in under-penetrated markets Figure 70:Market share gains in West Africa, Argentina
0%
5%
10%
15%
20%
25%
South Asia Nigeria East &CentralAfrica
WestAfrica
North &Southern
Africa
Philip, LatAm high
share
LatAmerica
low share
5 Yr CAGR growth in market (2011-2016)
0%
10%
20%
30%
40%
South Asia Nigeria East &CentralAfrica
WestAfrica
North &Southern
Africa
Philip, LatAm high
share
LatAmerica
low share
Bajaj's mkt share in 5 years
Source: UN Comtrade, Credit Suisse estimates Source: UN Comtrade, Credit Suisse estimates
FY14 could be a big year for Bajaj
Given the fact that Bajaj has hedged its entire export exposure for FY13 at Rs50/USD, the
benefits of difference in currency depreciation with respect to Chinese players will start
from FY14 only. We believe Bajaj will not retain the entire currency benefit in FY14 as well
and will pass a part of it especially in regions where it has lower market share to grab
market share from the Chinese. Also, FY13 export volumes for Bajaj have been impacted
by a number of disruptions in some of its large export markets viz. increase in import
duties in Sri Lanka, political disruptions in Egypt, trade restrictions in Argentina, dollar
trade embargo in Iran, etc., and hence FY13 will be weak year meaning a weak base for
FY14 growth.
Figure 71: We expect a 20% CAGR in Bajaj’s export volumes over the next five years
Current 5 Years
2W penetration
Mkt Size Bajaj Size Bajaj's
Share
Mkt growth Bajaj's
share
Mkt size Bajaj's size Bajaj's
growth
South Asia 1.0% 1.2 0.2 17% 8% 17% 1.8 0.3 8.0%
Nigeria 3.4% 1.35 0.31 23% 10% 30% 2.2 0.7 16.0%
East & Central Africa 0.8% 0.8 0.22 28% 20% 30% 2.0 0.6 22.1%
West Africa 2.5% 1.0 0.03 3% 15% 20% 2.0 0.4 68.1%
North & Southern Africa 0.9% 0.4 0.03 8% 10% 15% 0.6 0.1 26.4%
Alliances could help in Japanese dominated markets
High penetration, low market share markets
South-east Asian markets like Indonesia, Vietnam, Thailand and Brazil in Latin America
are markets where penetration is >20%. However, there is steady replacement demand in
these markets. Also, given the improving income levels the demand for higher cc vehicles
is increasing in these countries. Whilst Bajaj already sells its Pulsar in most of these
countries, it has not had too much success in the South East Asian markets where the
Japanese players are dominant except for Philippines. And in the Philippines, Bajaj sells
its vehicles via the Kawasaki network; so the Pulsar is sold as a Kawasaki Bajaj Rouser.
The Pulsar is assembled in Kawasaki’s Philippines plant and Kawasaki’s higher cc models
29 August 2012
India Two Wheeler Sector 27
like Ninja250 and Ninja 650R are assembled in Bajaj’s Chakan plant. Media reports and
management commentary has hinted at the possibility of extending this tieup for other
markets. The fact that Kawasaki’s models start from 250cc range means that this tieup
could be beneficial for both parties. Hence, if this happens, there is the possibility of
additional volumes from these markets as well; currently, we do not build any of it in our
numbers.
Kawasaki, Bajaj, KTM could be a formidable global alliance
Bajaj Auto acquired a 24.5% stake in KTM in 2007 for ~Euro 100 mn in 2008 and since
then the relationship between KTM and Bajaj Auto has developed further resulting in Bajaj
Auto increasing its stake to ~47% with an overall investment of ~Euro 190 mn. KTM is the
second largest motorcycle manufacturer in Europe with a sharp focus on off-road and
motor-cross segments, where it is a global leader.
The focus of the KTM and Bajaj partnership lies on the common development and
production (in India) of street motorcycles in the 125 to 375 cc segments. KTM and Bajaj
have already jointly developed a product called the KTM Duke 125. The Duke which was
launched in March 2011 is one of the largest selling motorcycles in the European market.
All KTM street motorcycles jointly developed with Bajaj would be manufactured at Bajaj’s
Chakan plant helping the two companies realising back end synergies thus allowing KTM
to take advantage of Bajaj’s lower cost of production. The two companies are currently
jointly working on a 375 cc street motorcycle.
The two companies are also working on a common distribution in select emerging markets
(along with Kawasaki in some cases) like India, Malaysia, Indonesia, etc. Bajaj has
already introduced the KTM Duke 200 (extension of the 125cc) motorcycle into the Indian
market.
Figure 72: KTM’s financials have steadily improved
Euro m Sep-07 to Aug-08 Sep-08 to Aug-09 Sep-09 to Dec-10 2011
Volumes 92,385 64,080 85,543 81,200
Net Sales 605,655 454,618 591,379 526,801
EBITDA 20,128 (32,013) 29,961 31,010
EBITDA margin 3.3% -7.0% 5.1% 5.9%
PAT 6,044 (81,433) 13,963 20,819
Source: Company data, Credit Suisse
29 August 2012
India Two Wheeler Sector 28
Asia Pacific / India
Automobile Manufacturers
Bajaj Auto Ltd.
(BAJA.BO / BJAUT IN) INCREASE TARGET PRICE
Distinctly global
■ Raise target price by 16%. Given our expectations of higher growth in export markets and a better visibility on the same (post our detailed analysis), we increase our FY14 estimates by ~5% and target multiple for Bajaj Auto by 10% from 14x to 15.5x; this leads to an increase in target price to Rs2,152 providing a >30% potential upside. On current prices, both Bajaj and Hero trade at similar multiples of ~12x FY14; however, we reckon given its stronger export franchise volume growth (driven by exports) in Bajaj will be higher than Hero and, hence, we price Bajaj at a ~5% premium to Hero.
■ Exports to grow at a ~20% CAGR for the next five years. We reckon Bajaj Auto is set to increase its market share in the export markets from ~15% to ~25% largely taking away share from Chinese. Our market share prognosis is based on the fact that pricing which is the key advantage of the Chinese manufacturers vis-à-vis the Indians is likely to diminish going forward on account of currency fluctuations and increase in labor costs for the Chinese manufacturers. Chinese dominate the two largest and fastest growing export markets of Africa and Latin America with ~80% share and, thus, there is plenty on offer for Bajaj.
■ Premiumisation trend should continue in medium term. The share of the premium segment doubled from 9% to 18% from FY06 to FY11; however, with the slowdown in the economy in the last couple of years, premium segment share has declined to 16%. Given that Bajaj Auto is the market leader in this segment, its domestic volumes were impacted by the same. We believe that with economic recovery, premiumisation trend should return.
■ Maintain Bajaj Auto as our top pick in Indian Autos. Despite the fact that the stock is up ~15% since 1Q results, we reckon there are more legs to this story. Whilst earlier we saw a bottoming out of margins, this time our outlook is based on more comfort on growth. We believe Bajaj will witness robust growth in its FY14 exports and at ~12x FY14 valuations clearly are not demanding. The key risk to our call is adverse regulation in any of their large export markets and continued slowdown in the domestic market impacting premium segment volumes.
Share price performance
80
100
120
140
1200
1400
1600
1800
2000
Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12
Price (LHS) Rebased Rel (RHS)
The price relative chart measures performance against the BSE
SENSEX IDX which closed at 17490.81 on 29/08/12
On 29/08/12 the spot exchange rate was Rs55.67/US$1
Companies Mentioned (Price as of 29 Aug 12) Bajaj Auto Ltd. (BAJA.BO, Rs1,627.25, OUTPERFORM, TP Rs2,152.00) Hero Motocorp Ltd. (HROM.BO, Rs1,849.65, NEUTRAL, TP Rs2,056.00) Honda Motor Corp. (7267, ¥2,559, OUTPERFORM, TP ¥2,850, OVERWEIGHT) Suzuki Motor Corp. (7269, ¥1,494, NEUTRAL, TP ¥1,540, OVERWEIGHT) Yamaha Motor Co. (7272, ¥716, OUTPERFORM [V], TP ¥960, OVERWEIGHT)
Disclosure Appendix Important Global Disclosures
Jatin Chawla & Akshay Saxena each certify, with respect to the companies or securities that he or she analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
See the Companies Mentioned section for full company names.
3-Year Price, Target Price and Rating Change History Chart for BAJA.BO
The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities.
Analysts’ stock ratings are defined as follows: Outperform (O): The stock’s total return is expected to outperform the relevant benchmark* by at least 10-15% (or more, depending on perceived risk) over the next 12 months. Neutral (N): The stock’s total return is expected to be in line with the relevant benchmark* (range of ±10-15%) over the next 12 months. Underperform (U): The stock’s total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 months. *Relevant benchmark by region: As of 29th May 2009, Australia, New Zealand, U.S. and Canadian ratings are based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe**, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. Some U.S. and Canadian ratings may fall outside the absolute total return ranges defined above, depending on market conditions and industry
29 August 2012
India Two Wheeler Sector 39
factors. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; for European stocks, ratings are based on a stock’s total return relative to the analyst's coverage universe**. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. **An analyst's coverage universe consists of all companies covered by the analyst within the relevant sector. Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.
Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.
Analysts’ coverage universe weightings are distinct from analysts’ stock ratings and are based on the expected performance of an analyst’s coverage universe* versus the relevant broad market benchmark**: Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months. *An analyst’s coverage universe consists of all companies covered by the analyst within the relevant sector. **The broad market benchmark is based on the expected return of the local market index (e.g., the S&P 500 in the U.S.) over the next 12 months.
Credit Suisse’s distribution of stock ratings (and banking clients) is:
Global Ratings Distribution Outperform/Buy* 45% (52% banking clients) Neutral/Hold* 42% (49% banking clients) Underperform/Sell* 11% (39% banking clients) Restricted 2%
*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.
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See the Companies Mentioned section for full company names. Price Target: (12 months) for (BAJA.BO) Method: Our Rs2,152 target price for Bajaj Auto is based on a P/E (price-to-earnings) of 15.5x FY14 earnings. Our valuation P/E is a 5% premium to the company's historic multiple, as we now have greater visibility on exports, and believe the company will witness robust growth in its FY14 exports. Risks: Key risks that could impede achievement of our Rs2,152 target price for Bajaj Auto include: if 3W exports fail to recover and Honda gains much greater traction in domestic 2W market. Price Target: (12 months) for (HROM.BO) Method: Our Rs2,056 target price for Hero Motocorp is based on a P/E (price-to-earnings) of 15x FY14 earnings. Our valuation multiple is in line with historic multiples. Risks: Key risks that could cause the share price to diverge from our target price of Rs2,056 for Hero Motocorp include: if there is a disruption caused by the fact that Hero Motocorp would shift to new brand identity along with Honda's entry in the Indian motorcycle market. The key upside risk is a rerating of the stock on account of failure of Honda's recently launched motor-cycle in the executive segment - "Dream Yuga".
Please refer to the firm's disclosure website at www.credit-suisse.com/researchdisclosures for the definitions of abbreviations typically used in the target price method and risk sections.
See the Companies Mentioned section for full company names. Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (HROM.BO) within the next 3 months.
Important Regional Disclosures
Singapore recipients should contact a Singapore financial adviser for any matters arising from this research report.
The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (BAJA.BO, HROM.BO) within the past 12 months.
Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.
29 August 2012
India Two Wheeler Sector 40
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29 August 2012
Asia Pacific / India
Equity Research
AU0260.doc
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