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1 Tata Group & 1 Hinduja Group Stocks To Buy As Suggested By ICICI Securities

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The shares of Tata Motors and Ashok Leyland have been recommended for buy by ICICI Securities, a domestic brokerage firm. Tata Motors has a target price of Rs 550 set by the brokerage, while Ashok Leyland has a target price of Rs 140.

Tata Motors (TML)
 

Tata Motors (TML)

"TML has been at the forefront of electrification, with electric PV sales in India at ~15,000 units (~82% of market share) on FY22E YTD basis. Further, it plans to launch 10 new models by 2025 in India and go all electric at Jaguar sub-brand in its foreign subsidiary JLR by 2025 along with six BEVs in Land Rover in the next five years. TML has witnessed runaway success at its Indian PV arm with innovative feature rich and consumer centric product launches with channel inventory < six days at beginning of Q4FY22 and market share at ~13% as of 9MFY22 vs. ~8-9% as of FY21," says ICICI Securities.

According to the brokerage "TML witnessed chip constraints at its JLR arm with subdued volumes in Q2- Q3FY22. The management at JLR has guided for a gradual improvement in production levels amid improving chip availability."

The brokerage has claimed "Going forward, we believe JLR could be adversely impacted due to ongoing geopolitical crises given its production base in Europe, which is reasonably dependent on Russian oil & gas resources for its energy needs. Moreover, demand sentiments could also take a knock off momentarily amid such times of uncertainty. At the consolidated level, as an entity, TML could witness pressure on volumes and profitability due to re-surfaced chip availability concerns & rise in key commodity prices respectively. Consequently, we downward revise our sales and margins estimates, going forward. However, we derive comfort from TML's long term target of healthy profitability, healthy FCF generation and consequent tapering of debt on b/s. Hence, we retain BUY rating on TML with SOTP based target price of Rs 550."

Ashok Leyland (ALL)

Ashok Leyland (ALL)

The brokerage has highlighted that "Ashok Leyland (ALL) is a pure-play CV manufacturer domestically, with market share of 16.3% as at FY21. The company is present in M&HCV trucks and buses as well as LCV goods segments. Product mix is 48.3%, 45.8%, 5.6% for LCV goods, Trucks & Bus segment, respectively."

"ALL is seen as beneficiary of revival of M&HCV demand amid increased government's infrastructure push (capex spend up 35% YoY for FY23E in Union Budget) and pick-up in core industrial activity. The company also stands to benefit from re-opening of schools and colleges, which shall generate demand for the buses segment," as per the brokerage.

According to ICICI Securities "ALL is also at the forefront of electrification with the company winning relevant orders in the electric bus segment from state transport undertakings domestically. It is also expected to raise capital at its EV arm i.e. Switch Mobility, which will help in value discovery at that segment with ALL aiming to retain majority ownership."

ICICI Securities says "ALL could witness disruption from the general industry trend of chip availability concerns and commodity led raw material price inflation. Given the low operating margin profile of the CV players, the impact on the bottom-line would be substantial. However, given that we value this business on an EV/EBITDA basis, the impact on target price will be limited. Given the ongoing cyclical recovery in the CV space, we remain positive on this stock and assign BUY rating. We value ALL at revised SOTP based target price of Rs 140 (15x CV FY24E EV/EBITDA, 2.5x P/BV for investments; earlier target price Rs 165)."

Disclaimer

Disclaimer

The stocks have been picked from the brokerage report of ICICI Securities. 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.


 

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