Auto Stocks That Could Benefit From The Govt’s PLI Scheme, Should You Buy?

The government has announced a production-linked incentive (PLI) scheme with an incentive outlay of Rs 259 billion for the auto sector. Emkay Global in its latest report has highlighted the stocks that could be key beneficiaries from the government's move. Let's take a look, whether you need to buy these stocks.

What is the PLI scheme announced by the government?

The production-linked incentive scheme has been announced by the government for the auto industry, with an incentive outlay of Rs 259 billion, which is lower than the earlier proposal of Rs 570 billion. According to Emkay Global the scheme is aimed at supporting the manufacturing and adoption of electric/hydrogen fuel cell vehicles and the localization of advanced technology components. The PLI scheme, which will be effective from FY23, is likely to bring in fresh investments of over Rs 425 billion and incremental revenues of over Rs 2,300 billion in the five-year period.

Who are the likely beneficiaries from the PLI Scheme?

"We believe that existing OEMs, especially in 2Ws, could be negatively impacted by the faster EV adoption, owing to increased competition from startups like Ola Electric.
Ancillaries are likely to benefit from localization opportunities for both ICE parts and BEV/FCEV parts.

Key beneficiaries include: Sona BLW Precision Forgings, Minda Industries, Minda Corporation, FIEM Industries, Lumax Industries, Varroc Engineering, Endurance Technologies, Wabco and JTEKT India, among others.

Should you buy these stocks?

While the above stocks are likely to be beneficiaries, Emkay Global has not made any recommendations to buy these stocks. It's always hard to figure out the extent of impact on any company's bottomline, especially if the policy has just been announced. The problem right now is that the markets have run-up so sharply and so fast, it's always a risk to buy into stocks now. Therefore, before brokerage make a recommendation, we wish to point out stocks are expensive with the Sensex having breached the 59,000 points mark. Also, with regards to the stocks that are beneficiaries there is no point in over exuberance unless a thorough analysis is done.

Disclaimer:

Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in the article. Caution needs to be exercised as stocks are subject to risks associated with the stock markets. Neither the brokerage nor Greynium has recommending buying the above mentioned stocks. What is highlighted is merely the beneficiaries from the government's PLI scheme for the auto sector.