IDBI Capital Recommends Buy These 3 Large Cap Auto Sector Stocks Post September Sales Update

Leading brokerage firm IDBI Capital in its monthly sales update of the Automotive sector has given a "buy" tag to 3 leading large-cap auto sector stocks namely Maruti Suzuki India Limited, Mahindra & Mahindra Limited, and Eicher Motors Limited, for gains up to 45%.

According to the brokerage firm, In September 22, Overall Indian Auto industry witnessed mixed performance. The Passenger Vehicle (PV) segment reported volume recovery despite semiconductor shortages while the demand remains robust. The Domestic 2W market continues to exhibited weakness. The CV segment reported growth primarily due to lower base, higher Infra spending and increased freight movement across India while the Tractor segment performance was better prior to earlier months. "Our Top picks in the sector are MSIL, M&M and SJS Enterprises. MSIL and M&M are well-positioned to address turnaround in Indian PV market. SJS to be beneficiary of growth momentum in 2W/4W industry," the brokerage has said.

Key highlights of the sales update

PV segment - The Industry PV Sales in September 2022 showed improvement on YoY basis. "The demand for PV remains strong with visible recovery seen in context to chip crisis. Going ahead, we expect volume growth momentum to sustain in the segment," the brokerage has said.

2W segment - The Industry 2W Sales in September 2022 weakened further led by poor rural and urban demand. The recovery seems to be delayed.

CV segment - The Industry CV Sales in September 2022 improved on YoY basis, which was primarily due to opening of economy, revival in freight movement and pick up in construction activities. "We expect good volume growth in upcoming months," the brokerage has said.

Tractor segment - The Industry Tractor Sales improved in September 2022 on YoY basis. "We expect steady improvement in volumes in coming months supported by good monsoon season," the brokerage said.

Stocks to Buy – CMP, Target Price, Potential Upside

Stocks	CMP	Target Price	Potential Upside
Maruti Suzuki	Rs 8,736.75	Rs 10,047	15.00%
Mahindra & Mahindra	Rs 1,224.15	Rs 1,765	45.00%
Eicher Motors	Rs 3,476.50	Rs 3,638	5.00%

Maruti Suzuki India Limited

Maruti Suzuki India Limited (MSIL), a subsidiary of Suzuki Motor Corporation, Japan, is India's largest passenger car maker. Maruti Suzuki is credited with having ushered in the automobile revolution in the country. The Company is engaged in the business of manufacturing and sale of passenger vehicles in India.

MSIL Mini segment grew by 98% YoY and MoM to 29.6k. The Compact sales grew YoY by 246% and MoM flat by 0.9% to 72.2k units. The Mid-Size segment grew YoY by 38.5% to 1359 units. The Domestic sales were grew YoY at 150.9k units. The Total Sales improved YoY indicating gradual recovery in chips procurement. The overall chip shortage situation is expected to be better than last year.

The current market price of the stock is Rs 8,736.75/share on NSE. The stock in the past 1 month didn't perform well and gave negative returns. However, in the past 3 months, it gave 2.01% positive return. It gave a 17.17% positive return over the past 1 year. In the past 3 years, it gave 32.42% positive return and 11.08% positive return in the past 5 years.

The brokerage has given a buy tag to the stock with a target price of Rs 10,047/share. According to this, the stock is likely to surge by 15%.

Mahindra & Mahindra Limited

Mahindra & Mahindra Ltd. (M&M) automotive sector company that manufactures a different range of automotive vehicles, agricultural tractors, implements and industrial engines. It serves the Indian utility vehicle sector as well as the worldwide tractor market as Mahindra Group's flagship business. The company's fleet includes a diverse range of vehicles, including two-wheelers, big trucks, SUVs, and school buses.

M&M UV sales increased by 166% YoY to 34k units. The CV sales increased by 129% YoY to 21.7k units. The Total Auto division Domestic sales increased by 143% YoY to 62k units. M&M has good order books Thar, XUV 300, Bolero Neo and Bolero Pick-up models. The XUV700 is getting good responses from customers. The newly launched Scorpio-N in June-22 is expected to perform well. The Domestic FES Sales grew by 21% YoY and 126% MoM to 47K units, FES total sales grew by 21% on YoY and 126% on MoM.

The current market price of the stock is Rs 1,224.15/share on NSE. Its shares in the past 1 week have given 2.31% negative return, and in the past 1 week around 3.94% respectively. It has given 9.31% positive return in the past 3 months and 41.06% positive return in the past 1 year. In 3 years, it gave 124.04% positive return, and 90.15% positive return in the past 5 years, respectively.

IDBI Capital has given a buy tag to the stock with a target price of Rs 1,765/share for a potential gain of up to 45%.

Eicher Motors Limited

Incorporated in 1982, Eicher Motors Limited is the flagship company of the Eicher Group in India and a leading player in the Indian automobile industry. The company is also the owner and operator of The Royal Enfield Motorcycles in India. A division of Eicher Motors Limited, Royal Enfield has created the mid-size motorcycle segment in India with its unique and distinctive modern classic motorcycles.

Royal Enfield Domestic Sales increased by 170% YoY to 73.6k units. The Total Sales increased by 145% YoY to 82k. VECV Sales grew by 9.2% YoY and 32.5% MoM to 6,631 units.

The current market price of the stock is Rs 3,476.50/share. It has given 4.71% negative returns in the past 5 days, whereas in the past 1 month, it gave 3.4% positive returns. Over the past 1 year, the stock gave 24.03% positive return. In the past 3 and 5 years, it gave 94.36% and 10.93% positive returns, respectively.

The brokerage has given a buy tag to the stock with a target price of Rs 3,638/share. Considering the target price, the stock is likely to surge by 5%.

Disclaimer

The stocks have been picked from the brokerage report of IDBI Capital. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.