It was a mixed session in trade for the US indices in overnight trade which saw a drag on Dow Jones, while S&P 500 and Nasdaq indices made minor gains, there are anticipations that global markets discounting the Fed tapering nearing may see some drag, including Indian markets. Notably, SGX Nifty which provides for a direction to the Indian markets at the time of writing this story at around 6 am traded lower by over 200 points or down 1.25% signifying deep cuts the bluechip Nifty index. In the previous session on Wednesday, Sensex clinched levels of 56,000 for the first time, while Nifty headed to above 16,700 points, but failed to hold such high intra-day levels at the close, weighed by financials, private bank, metal, realty and auto sectors among others.
Now with the opening of economy as well as preference for personal mobility solution is fuelling the demand or there is seen pent up demand in the auto space, going ahead analysts are bullish on the sector. So, even if you are willing to participate in the auto growth story, Angel Broking has listed out 4 stocks for substantial gains:
1. Ashok Leyland:
Ashok Leyland is the leading Commercial Vehicle (CV) player in the country, with major market share in the M&HCV (mid and heavy commercial vehicle). Further the company also shares in the fast booming light commercial vehicle (LCV) segment.
MHCV demand got severely dented owing to a couple of reasons such as change in axle norms, increase in prices because of the incorporation of BS 6 norms followed by sharp drop in demand due the ongoing Covid-19 crisis. But then even before the second wave there was seen some gradual recovery. Angel Broking 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:
GNA is one of the major suppliers of rear axles to the commercial vehicle industry and with the pick-up in demand for the CV segment, the future looks bright for the company. Majorly i.e. 60% of the revenues, the company draws from exports. The pick-up in demand for trucks in the US and Europe is likely to further benefit the company. In the US, which contributes the company's almost 40% revenues, there have been seen strong sales for class 8 truck category. The company is also gearing up to enter the SUV space and the recovery in domestic CV space will also be profitable for the company going ahead. "At current level the stock is trading at a P/E multiple of 11.6x FY23E EPS estimate of Rs. 58", says the company in its report.
3. Escorts Ltd.:
The company is largely the prominent tractor player with its leadership mostly in the Northern and Eastern belt of the country. "Considering record food-grain procurement by government agencies, strong rural economy as well expectation of good Kharif crop in 2021, we expect the tractor industry will continue to outperform the larger automobile space in FY22 with Escorts being a key beneficiary", said the brokerage report.
Also, the overall recovery and increasing expenditure on infra will boost constructionequipment and railway division revenue growth.
"Escorts in the recent past has also entered into a strategic partnership with Kubota Corporation of Japan (one of the global leaders in farm machinery and
implements), which provides further visibility of growth for the company, goingforward", added the brokerage.
4. Suprajit Engineering:
The company is the major supplier of automotive cables to the domestic OEMs (Original Equipment Manufacturers) with presence in both 2Ws and PVs. The low-cost player has now diversified exposure and has over the years gained significant business. As against the double digit declines for the domestic 2W and PV segment in FY21, the company managed to outperformer the broader auto industry.
"Suprait has grown profitably over the years and as a result boast a strong balancesheet (net cash). Angel Broking believes, Suprajit 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."
4 Stocks From The Auto Space To Buy In August For Gains Up To 28%
|Auto stock||Price at the time of recommendation||Last traded price as on closing of August 18, 2021||Target price||Potential gains in %|
The stocks listed from the auto space are recommendations of leading brokerage space for August month. But these need not be construed as investment advice, the story is just for informational purpose.