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4 Mid and Small Cap Auto And Auto Ancillary Stocks To Buy From Angel Broking For July Month

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As we write markets ended higher on the previous day (July 14, 2021) at above 15850 levels and there is expected to be consolidation in narrow range until the levels of 15,600-15,900 are breached on either side. Market experts believe that there are more of opportunities in the mid and small cap space.

 

4 Auto And Auto Ancillary Stocks To Buy From Angel Broking For July Month

So, here are given few of the Angel Broking stock picks for July from the Auto pack. There is expected huge resilience in the sector with the recovery in economy as well as preference of personal mobility solutions amid Covid 19, the continuance of which is uncertain.

By and large the leading brokerage has adhered with its June buy calls for the Auto pack:

1. Suprajit Engineering:
 

1. Suprajit Engineering:

Angel Broking has recommended the scrip of auto ancillary firm for a target price of Rs. 360 and the price at the time of recommendation has been Rs. 285 (closing price of scrip on July 7, 2021). Notably Suprajit Engineering is a small cap stock with a market capitalization of Rs. 3646 crore. Last the stock traded at a price of Rs. 310.3

Low cost, diversified exposure and net cash position a big-positive for the auto ancillary firm

Suprajit Engineering (SEL) is the largest supplier of automotive cables to the domestic OEMS with presence across both 2Ws and PVs. Over the years, SEL has evolved from a single product/client company in India to having a diversified exposure which coupled with its proposition of low-cost player has enabled it to gain market share and more business from existing customers, said the brokerage firm.

The brokerage firm in its report said the firm in recent years has outperformed (posting positive growth vs low double-digit declines for the domestic 2W and PV industry in FY21). The company believes that consolidation of vendors and new client additions would help in maintaining the trend of market/wallet share gains. SEL has grown profitably over the years and as a result boast a strong balance sheet (net cash).

"We believe SEL is prime beneficiary of ramp-up in production by OEMs across the globe and is well insulated from threat of EV (is developing new products). Its premium valuations are justified in our opinion owing to strong outlook and top grade quality of earnings.", adds the brokerage report.

Y/ESalesOPMPATEPSROEP/EP/BVEV/Sales
March (` cr) (%) (` cr) (`) (%) (x) (x) (x)
FY2022E 1840 14.9 175 12.6 16.8 22.4 3.6 2.2
FY2023E 2182 15.8 227 16.4 19.5 17.3 3.2 1.8

2. GNA Axles:

2. GNA Axles:

Angel Broking is again bullish on this small cap scrip from the auto ancillary space. The scrip as on June 30, 2021 commanded a market cap of Rs. 834 crore.

The brokerage states that the company is a major supplier of rear axles to the commercial vehicles industry and is seen as the top beneficiary of the revival in the commercial vehicle (CV) cycle. Major portion i.e. as much as 60% revenues are accounted for from the company's exports while the remaining comes from the domestic markets.

Robust truck sales outlook in US and Europe markets to benefit GNA Axles

"GNA is expected to be one of the biggest beneficiaries of strong growth outlook for truck sales in US and Europe markets which are witnessing strong recovery in demand. US which accounts for almost 40% of the company's revenues has been registering strong class 8 truck sales. The venture into the SUV axle would provide the company with new growth avenues while the recovery in the domestic CV cycle also bodes well for the company. At current level the stock is trading at a P/E multiple of 11.8x FY23E EPS estimate of Rs. 39", added the brokerage firm.

The broking house sees the target of Rs. 550 for the stock i.e. an upside of 19% from the price when the scrip was given a ‘Buy' i.e. from Rs. 462 levels. As of writing this report, the stock has hit a fresh 52-week high in today's trade of Rs. 505.95.

Y/ESalesOPMPATEPSROEP/EP/BVEV/Sales
March (` cr) (%) (` cr) (`) (`) (%) (%) (x)
FY2022E 1026 15.5 76 35.4 13.6 13.1 1.8 1
FY2023E 1140 15 84 39.3 13.3 11.8 1.6 0.9

3. Escorts:

3. Escorts:

For the tractor major the brokerage firm sees the stock price to scale to Rs. 1573 i.e. a substantial upside from Rs. 1204 (the closing price as on July 7, 2021). The stock last traded at a price of Rs. 1197.2. The company today announced a final dividend of Rs. 5 per share for FY21. The company for the FY commanded a market share of 11.3 percent.

Record procurement of food grain by government agencies major advantage for tractor company

In the broader automobile segment, the company is seen to outperform as there is huge traction in food procurement by government agencies as well as good Kharif crop in 2021. Also, there is seen good earnings visibility for the company after the company has entered into a strategic partnership with Kubota Corporation of Japan (one of the global leaders in farm machinery and implements).

Notably Escorts is a mid-cap auto company with market capitalization of Rs. 16,948 crore.

Y/ESalesOPMPATEPSROEP/EP/BVEV/Sales
March (` cr) (%) (` cr) (`) (%) (x) (x) (x)
FY2022E 7843 14.7 874 86.4 14.6 13.9 2 2.5
FY2023E 8840 15.3 1034 102.2 14.8 11.8 1.7 2.3

4.	Ashok Leylamd (ALL):

4. Ashok Leylamd (ALL):

The brokerage firm in its report stated that Ashok Leyland is the top player in India CV industry with a 32% market share in the MHCV segment. The company also has a strong presence in the fast growing LCV segment. Demand for MHCV was adversely impacted post peeking out due to multiple factors including changes in axel norms, increase in prices due to implementation of BS 6 norms followed by sharp drop in demand due the ongoing Covid-19 crisis. While demand for the LCV segment has been growing smartly post the pandemic, demand for the MHCV segment has also started to recover over the past few months before the 2nd lockdown while demand for buses are expected to remain muted due to greater preference for personal transportation.

Company best placed to benefit from the CV segment revival

"We believe that the company is ideally placed to capture the growth revival in CV segment and will be the biggest beneficiary of the Government's voluntary scrappage policy and hence rate the stock a buy", added the brokerage report.

This is again a mid-cap auto company with a market cap of Rs. 35,410 crore as on June 30, 2021.

Y/ESalesOPMPATEPSROEP/EP/BVEV/Sales
March (` cr) (%) (` cr) (`) (%) (x) (x) (x)
FY2022E 22491 7.8 558 1.9 7.6 65.8 4.9 1.8
FY2023E 30700 10.1 1560 5.3 19.6 23.5 4.4 1.3
Disclaimer

Disclaimer

All of the above stocks are picked from brokerage report of Angel Broking. Investing in stocks is risky and investors should do their own research. The author, the brokerage firm or Greynium Information Technologies Pvt Ltd is not responsible for any losses incurred due to a decision based on the above article. Investors should hence exercise due caution as markets have run-up significantly.

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