4 Top Auto Sector Picks By Angel Broking For September 2021 For Up To 26% Gains

1. Suprajit Engineering:

The company has reiterated its bullishness on Suprajit Engineering, the largest supplier of automotive cables to the domestic OEMS with presence across both 2Ws and PVs, for a target price of Rs. 390, which means gains of 26% considering closing price as on September 9, 2021

Rationale for a 'Buy' on Suprajit :

Strengths:

1. Moved from a single product, single client company to have diversified exposure
2. Low cost enabled the company to get more business
3. Outperformed the segment in the recent years with double digit growth as against low double digit declines in the segment in FY21.
4. Net cash position

"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.

2. Sona BLW:

This scrip has lately debuted on the D-Street and Angel Broking is bullish on the scrip for a target of Rs. 609, implying gains to the tune of 11% from last traded price of Rs. 550.5 per share on the NSE as on September 9, 2021.

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. The company in the FY21 raked in most of its revenue from end use in the international markets.

Fastest growing global Battery Electric Vehicles big trigger 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, adds the report.

"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", mentions the brokerage firm in its report.

3. GNA Axles:

Angel Broking has given a 'Buy' recommendation for GNA Axles for the similar target price of Rs. 815 as before.

The company is one of the leading suppliers of rear axles to the Auto industry. The company majorly catering to the CV segment is likely to be biggest beneficiary of the revival in the space. Major portion of its revenue are accounted for by the exports market of as much as 60%.

"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", says the report.

'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", added the report.

4. Ashok Leyland:

This tractor player is also betted on for by Ashok Leyland for a target price of Rs. 158 per share. Ashok Leyland has a significant share in MHCV and the demand got severely impacted owing 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.

Now even as MHCV segment has seen a pick-up, demand for buses shall remain low amid preference for personal mobility solution. "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", says Angel Broking.

Disclaimer:

Stock market investments are risky. The stock picks are taken from Angel Broking report and should not be construed as investment advice. Greyinum and its employees shall not be liable for any losses incurred on the decision taken considering the above report.

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