2 Auto Stocks That Can Generate Good Returns For Investors

Markets have been exceedingly volatile over the last few days. At such times, investors should look at stocks from a long-term perspective, rather than short term wild swings. Here are 2 auto stocks that can be good buys for the long-term.

Atul Auto - Improving volumes, maintaining a Buy

Broking firm, Anand Rathi has a buy call on the stock of Atul Auto. "We continue to expect strong demand momentum in domestic and export markets as passenger movement gradually improves. Volumes for Jan'22 grew 6% y/y, 3% m/m, to 1,727units; we expect volumes to improve further in subsequent months as economic activity improves post -third-Covid wave. In EVs, launch plans are in line, to launch a product by H1 CY22. Hence, we expect revenue to grow strong 53% in FY23 and 23% in FY24," the brokerage has said.

For Atul Auto, consistent sequential recovery in three-wheeler volumes was the highlight of the quarter. High RM costs continue to arrest margins.

"We expect volumes to recover when as economic activity improves post-third-Covid wave. On the EV front, launches are on track for H1 FY23. Accordingly, we maintain a Buy at a lower target price of Rs 242 (12x FY24e).

The shares of Atul Auto last closed at Rs 185 on the NSE.

Ashok Leyland

Anand Rathi also has a buy call on the stock of Ashok Leyland. The brokerage has set a price target of Rs 157 on the stock.

The Q3 FY22 gross margin contracted 350bps year on year, 124bps quarter on quarter, to 22% due to higher RM prices and high discounts. "We expect operating leverage-led margin expansion, backed by expected volume growth and normalising RM cots. Accordingly, we expect margins of 9% in FY23 and 10% in FY24," the brokerage has said.

"For Ashok Leyland, strong and consistent recovery in volumes were the highlights of the quarter. As economic activity picks up, post-third Covid wave, we expect strong volumes. Also, launches in CNG have received a positive response and demand is strong, per management. On the EV front, it continues to build its order book for domestic and export markets. Accordingly, we maintain a Buy at a lower target price of Rs 157 (29x FY24e), broking firm Anand Rathi has said.

The shares of Ashok Leyland last closed at Rs 128 on the NSE.

Disclaimer

The stock has been picked from the brokerage report of Anand Rathi. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.