Buy This Large Cap Auto Stock For Potential Upside Of More Than 19%: Sharekhan

Sharekhan, a leading brokerage firm in India, has given a buy call for a large-cap stock from the auto sector. The brokerage firm is highly bullish on TVS Motors and has given a target price of Rs. 1254.

For the past month, the auto sector of India has been booming, and many good stocks in the sector are at their all-time highs. TVS Motor is also trading very near its all-time highs, and in the latest report, Sharekhan has mentioned that the stock can give an upside move of more than 19% from the current market price.

Here is a breakdown of the latest report of Sharekhan on TVS Motors.

Outlook of TVS Motors (TVSM)

With sales of more than 18,217 crores (about US$2.9 billion), TVS Motor Company is the third-largest two-wheeler manufacturer in India. The company has the manufacturing capability to produce over 4.95 million automobiles annually and sells more than 3 million units annually. TVS Motor is India's second-largest exporter, sending goods to more than 60 nations.

TVS Motors is a large-cap company, and the company's market capitalisation is Rs. 49,933 Crores. The stock's current market price is Rs. 1,051, with an all-time high of Rs. 1,095 and an all-time low of Rs. 513.

Outlook of Valuation and Company

"We expect TVSM to be a key beneficiary of two-wheeler demand, given its aggressive new product launches across its sub-segments. The company continues to further strengthen its 3W business through the launch of new products in key export markets, where it has a dominant market share. The EBITDA margin is expected to improve and remain sustainable at 10-12%, driven by the increasing share of premium products, operating leverage and cost-control measures. Further, the company's EV subsidiary provides an opportunity for value unlocking for the expansion of EV products and geographical reach. The stock trades at P/E multiple of 24.9x and EV/EBITDA multiple of 14.9x its FY2024E estimates," says the latest brokerage report of Sharekhan.

Overview of Sharekhan On the Auto Sector

According to the latest report of Sharekhan, "We expect growth momentum to continue in FY2023E, driven by strong rural sentiments, supported by higher kharif sowing and positive outlook for monsoon this year. The government's reforms and increased preference for personal transport are expected to improve volumes. Export markets have witnessed notable recovery in volume sales offtake across regional markets - ASEAN, South Asia, Middle East, and Africa. Original equipment manufacturers (OEMs) are positive on recovery and expect these markets to improve. Companies having exposure to export markets are expected to do well."

Buy Call Of Sharekhan On TVS Motors

In the latest report, Sharekhan mentioned, "We expect TVSM to continue to perform strongly and gain market share in international markets, driven by its wide and strong product portfolio and offerings in both the two-wheeler and three-wheeler segments and its focus on new product launches and enhancing geographical presence. We maintain our Buy rating on the stock with a revised price target (PT) of Rs. 1,254."

In one headline, the brokerage firm mentioned the whole report of TVS Motors, "On a top-gear growth path."

Key Risks On Buy Call Of Sharekhan

The Sharekhan report states, "Geopolitical tensions can affect commodity prices and supply constraints. Rising raw material prices may pose a threat to profitability if commodity prices continue to rise for a longer period."