Sharekhan has recently come out with its report on the automotive sector. The brokerage says it continues to remain positive on the sector despite near-term challenges of COVID-19 related disruptions and chips shortage. Here are 5 stocks the brokerage has a buy call on from its research report on the auto sector.
1. Amara Raja Batteries
|Current market price||Rs 683|
|Target price||Rs 1146|
Sharekhan has a price target of Rs 1,146 on the stock of Amara Raja Batteries as against the current market price of Rs 683.
"Amara Raja Batteries reported mixed results in Q1FY2022 with net revenue higher than expectations, while EBITDA margin contraction was sharper than expectations. We expect Amara to continue to outpace the organised lead-acid battery industry, led by new client acquisition, product launches, and benefits of its extensive distribution network. We maintain our estimates and price target," the brokerage has said.
2. Apollo Tyres
|Current market price||Rs 209|
|Target price||Rs 290|
The brokerage also has a "buy" call on the stock of tyre maker, Apollo Tyres. "Apollo Tyres Limited's Q1FY2022 results lagged expectations, as a higher-than-expected rise in raw-material costs hurt margins. Management remained positive on long-term targets of reporting revenue of $5billion, EBITDA margin of at least 15%, ROCE of 12-15%, and net debt to EBITDA of less than 2x by FY2026. We maintain estimates and price target," Sharekhan has said.
3. Exide Industries
|Current market price||Rs 157|
|Target price||Rs 229|
Sharekhan has a buy call on the stock of battery maker, Exide industries, with a price target of Rs 290.
"Exide reported mixed results in Q1FY2022. Revenue was ahead of expectations, while EBITDA margin contracted more than expected. Exide is expected to benefit from recovery from automotive OEMs and industrial battery demand, as lockdown restrictions are getting lifted and economic activities are getting back to normalcy. We maintain our estimates and price target," the brokerage has said.
4. Suprajit Industries
|Current market price||Rs 320|
|Target price||Rs 401|
The group is a global leader in the automotive cable and halogen bulb industry. Sharekhan has a buy call on the stock of Suprajit Industries with a price target of Rs 401.
"Q1FY2022 numbers were weak and below expectations, with revenue, EBIDTA, and PAT, declining by 29.5%, 39.8%, and 53%, respectively, on a q-o-q basis. Propelled by a robust business outlook and prudent capital allocation, expect Suprajit's earnings to report a 30.1% CAGR during FY2021E-FY2023E, driven by a 20% revenue CAGR and 130 bps improvement in EBITDA margin, with its ROCE improving back to 21.1% in FY2023E," the brokerage has said.
5. Alicon Castalloy
|Current market price||Rs 779|
|Target price||Rs 1056|
The brokerage has a buy call on the stock of Alicon Castalloy with a price target of Rs 1,056 on the stock.
"Q1FY2022 results were below expectations, marred by lower sales and higher-than-expected contraction in EBITDA margin. However, the company continues to grow its order book strongly. We have increased our earnings estimates by 29.2% and 28% for FY2022E and FY2023E, respectively, to build in the company's multi-year order wins and increased share of high-margin machined components," the brokerage has said.
The above stocks are based on the report of Sharekhan. Investing in stocks is risky and investors should do their own research. The author, the brokerage firms or Greynium Information Technologies are not responsible for any losses incurred due to a decision based on the above article. Investors should hence exercise due caution as are at record peaks. Please consult a professional advisor