Indices in trade on Tuesday are trading weak after reaching 18,000 milestone on the Nifty in the previous session. After previous day's gains in the auto pack led by expectations of better sales in the ongoing festive month, there is seen again an uptrend in these stocks, primarily led by Bajaj Auto, Eicher Motors, TVS Motor and Tube Investments among others.
Here are the brokerage firm Angel Broking's recommendation from the auto pack:
1. Ashok Leyland:
The company is bullish on the counter and sees it to hit a target price of Rs.158, implying an upside of close to 16 percent from current levels of Rs. 136.6 per share. The company is the leading player in the commercial vehicle industry
"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", says the report.
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
The brokerage firm believes 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.
2. GNA Axles:
This is an auto ancillaries firm which the brokerage is bullish on for the target price of Rs. 1233. This implies an upside of 17.7 percent from the current market price of Rs. 1047.
GNA Axles is one of the leading suppliers of rear axles to the Auto industry. The company is expected to
be one of the biggest beneficiaries of the revival in the CV cycle. The company derives 60% of its revenues from exports while the balance 40% of the company's
revenues comes from the domestic markets.
GNA is expected to be one of the biggest beneficiaries of strong growth outlook for truck sales in US and Europe markets.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 11.6x FY23E EPS estimate of Rs. 58.
3. Suprajit Engineering:
This is also the auto ancillaries firm for which the target set out by the brokerage is Rs. 390 per share. This means an upside of 6 percent from the current levels of Rs. 365.75.
Suprajit Engineering (SEL), is the largest supplier of automotive cables to the domestic OEMS with presence across both 2Ws and PVs. Being low cost players the company has both gained market share as well as more business from existing customers.
SEL has outperformed the Indian Auto industry in the recent years (positive growth vs low double-digit declines for the domestic 2W and PV industry
in FY21). "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 company in its report.
4. Sona BLW Precision:
For the casting and forgings company, the brokerage has set a target price of Rs. 719. From the current levels of Rs. 639, this implies an upside of 12 percent.
Sona BLW is one of India's leading automotive technology companies that derives 40% of its revenues from Battery Electric Vehicles (BEV) and Hybrid Vehicles. It supplies EV differential assemblies and gears, BSG systems and EV traction motors to global customers. This global BEV segment
has been fastest growing and is expected to maintain high growth rates which is positive for Sona BLW.
The company's capabilities have enabled them to gain market share across its products especially for products related to EV/BEV. They also have strong market share ranging from 55-90% for differential gears for PV, CV and tractor OEMs in India.
Given the traction in the BEV/Hybrid Vehicle space, we believe that Sona Comstar will continue to command higher multiple which is justified by ~47%
earnings CAGR over FY21-24E.
The above stocks to buy are picked from the report of Angel Broking. Please note investing in stocks is subject to market risks and one needs to be cautious at this point of time as markets have gone-up sharply. Neither the author, nor Greynium Information technologies Pvt Ltd would be responsible for losses incurred based on a decision made from this article.