Volumes to drive two-wheeler growth

Volumes to drive two-wheeler growth WE highlight the fact that financial benefits, in the form of tax-free manufacturing locations and export incentives, played a significant role in the robust earnings growth for all the top three twowheeler manufacturers during FY08-FY11.

However, with excise duties now bottoming out, tax-free periods lapsing and export incentives likely to come down, we believe earnings growth from hereon would be driven by volume growth and competitive positioning in the market. After the exit of Honda, entry of high-end bikes of Yamaha, new ambitions of Hero and waning financial benefits, it is important to take a relook at the framework to play this space. We have weighted certainty of volume growth as our key criteria and the ability to withstand competition as the other. Surprisingly, TVS scores are more favourable on these counts compared with Bajaj, given its insulated portfolio. Hero qualifies as our top pick because it is the right incumbent to capitalise on the mobility opportunities in India. We would accumulate at every dip in the immediate future.