Even as sectoral indices too lost in the global sell-off on October 15, 2020, the Nifty Auto pack was in the initial trade on Friday was firm on hopes of gaining demand as the festive season begins shortly. Also, we have already seen demand coming to pre-Covid levels in passenger vehicle, two-wheeler as well as the logistics space. The space saw resilience with Nifty Auto jumping 20 percent in comparison to 9 percent jump on the Nifty index in the just ended quarter.
Now HDFC Securities opines that gains on the stock prices will derive traction from retail trends during the festive season, sustained volume from rural segment, increasing inclination to opt for personal mobility solution, expectations of supportive government initiatives and structural reforms announced for the Agri sector. And now, amid the recovery in demand, market leadership position as well as broad based presence, HDFC Securities has a 'buy' recommendation on some of these 5 autos and logistics stocks.
1. Hero Motocorp:
In October 15, 2020, the stock of Hero Motocorp hit a 52-week high of Rs. 3380 per share. The volumes in the two wheeler segment are 7 percent year on year and the brokerage firm expects margin to be at 12.8 percent and profit after tax to remain in steady at Rs. 920 crore on year to year basis. The brokerage firm has placed a target of Rs. 3800 for the stock.
2. Maruti Suzuki:
The company sees 16% upside for the 4-vehicle auto major and expects revenue to scale higher by 16 percent on a year on year basis fuelled by growth in volumes by a similar level and PAT to increase by 11 percent on year to Rs. 1500 crore. HDFC Securities has specified key watch outs as demand trends specifically of the entry level cars and timeline of new product launches. On October 15, 2020 amid a global sell-off the stock of Maruti Suzuki closed weak by 1.73 percent at Rs. 6885.
3. Gateway Distriparks:
The transportation logistics company as per HDFC Securities is expected to surge by up to 30% to hit a target of Rs. 125. Though for the second quarter, the company holds a weak outlook in respect of its earnings. Other watch-outs as per the brokerage are the company's financials post fund-raising, timeline in respect of merger with subsidiaries as well as any news on Snowman Logistics stake sale as the transaction with Adani has been withdrawn.
HDFC has recently upgraded the stock to a 'Buy' after its rights issuance.
4. Gulf Oil Lubricants India:
As against October 13, 2020 closing price of Rs. 638.9, the company sees a 24 percent upside with a target of Rs. 790 per share. The key watch-out for the company in Q2 shall be volume stance in the deodorant segment as well as trends in raw material prices.
5. Bajaj Auto
HDFC Securities for the auto major has given an 'Add' recommendation and increased its initial target price from Rs. 3120 to Rs. 3230. For the second quarter, the company maintains an average outlook with volume in quarter up 138 percent. PAT at Rs. 10 billion will improve sequentially. Further, key monitorables for the company remain export particularly to the African continent and trends in relation to recovery in the Indian market.