5 Auto Ancillary Stocks To Buy As Suggested By Emkay Global

Emkay Global has a bullish outlook on the car industry, which is bolstered by prospects of a cyclical recovery. The top picks are Motherson Sumi and Apollo Tyre are two ancillary. The following are the main downside risks: a slower economic recovery, higher commodity prices, and currency volatility.

EMkay Global believes that a rebound in the underlying CV sector and the overseas industrials market should deliver sales growth of 70% for BHFC. Companies like Exide, Amaraj Battery, and Apollo Tyre, which benefit from replacement demand, may experience sales growth of 10-15% year over year. Minda is expected to boost its revenue by 13% this year, owing to increased sales in the alloy wheels and sensor sectors, as well as improved profitability of other segments' content.

Buy Apollo Tyre with upside potential of 37%

Emkay Global suggests buying the stock of Apollo Tyre for a target price of Rs. 305 per share, i.e. an upside of over 37 percent from the last traded price of Rs. 222.

The APMEA (20%) and Europe areas will drive revenue growth (3 percent ). Despite the greater size, EBITDA margins should fall due to delays in commodity inflation pass-through.

Exide Industries

Emkay Global suggests buying the stock of Exide Industries for a target price of Rs. 4,420 per share, i.e. an upside of over 17 percent from the last traded price of Rs.3771.

Replacement and industrial markets should drive revenue growth. Due to a favorable base, the company should outperform AMRJ in terms of sales growth. Despite the greater size, EBITDA margins should fall due to delays in commodity inflation pass-through.

Buy Motherson Sumi with upside potential of 34%

Motherson Sumi's stock is recommended by Emkay Global with a target price of Rs. 300 per share, representing a gain of almost 34% over the latest traded price of Rs.224.

Total revenues are likely to fall due to poor performance in the SMR PBV sector (-20 percent yoy). In comparison, the solo (22 percent) and PKC (42 percent) categories are predicted to increase at a good rate. Due to lower scale and delays in commodity inflation pass-through, the EBITDA margin may fall.

Buy Bharat Forge with upside potential of 27%

Emkay Global has set a target price of Rs. 920 per share for Bharat Forge's stock, reflecting a gain of over 27% over the current market price of Rs.722.

Domestic CVs (115 percent yoy), foreign CVs (189 percent), and overseas industrials should all see considerable growth (77 percent ). Despite a lag in commodity inflation pass-through, we estimate EBITDA margin expansion due to increased scale.

 

Buy Minda Industries with potential of 14%

Emkay Global has set a target price of Rs. 840per share for Minda Industries's stock, reflecting a gain of over 14% over the current market price of Rs734.

Growth in sectors such as Castings, Seating, Switches, and Others (sensors, etc.) will boost total revenue growth. Acoustics and lighting systems, on the other hand, are expected to decline. EBITDA margins may decline, owing to delays in commodity inflation pass-through and increasing personnel expenses.

5 Auto Ancillary Stocks To Buy As Suggested By Emkay Global

Stocks	Current market price	Target price	Likely gains %
Apollo Tyres	Rs 222	Rs 305	37%
Exide Industries	Rs 179	Rs 210	17%
Motherson Sumi	Rs 224	Rs 300	34%
Bharat Forge	Rs 722	Rs 920	27%
Minda Industries	Rs 734	Rs 840	14%

Disclaimer

The investment ideas are picked from Emkay Global Auto report. Investors should note that investing in stocks is risky and neither the author, nor Greynium Information Technologies Pvt Ltd, nor the brokerage would be responsible for losses based on a decision from the above article.