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Sharekhan Positive On Automobile Sector, Picks 19 Stocks With Buy Call & Positive On 3 Stocks

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Sharekhan, a leading brokerage firm, is positive on the Automobile sector in its Q2FY2023 Results Preview. The brokerage has placed "buy" calls on 19 leading stocks from the sector, 8 OEM stocks and 11 Auto Ancillary stocks. The brokerage also maintains its positive outlook on 3 leading stocks from the sector.

 

According to the brokerage, automobile companies performed strongly in Q2FY2023, with revenue and EBITDA reporting significant improvement during the quarter, led by robust domestic demand and softening raw-material prices. Chips shortage continued to ease during Q2FY2023, which led to improved production and sales of PV, premium bikes, and light commercial vehicles (LCV) in India as well as globally. "We stay positive on the automobile sector, driven by robust demand, new launches, and increasing traction for electric vehicles," the brokerage has said.

Auto Ancillaries Stocks - Stock, CMP, & Target Price

Auto Ancillaries Stocks - Stock, CMP, & Target Price

Sr.NoStocksReco.CMPPrice Target
1Alicon Castalloy LimitedBuy10061159
2Apollo TyresBuy315343
3BoschBuy16946.819795
4Exide IndustriesBuy184.6215
5Gabriel IndiaBuy193217
6GNA AxlesBuy665.8841
7Greaves CottonBuy147.85212
8Lumax Auto TechnologiesBuy268.85356
9Ramkrishna ForgingsBuy222.05279
10Sundram FastenersBuy9291110
11Suprajit EngineeringBuy343.25386
OEM Stocks - Stock, CMP, & Target Price

OEM Stocks - Stock, CMP, & Target Price

Sr.NoStocksReco.CMP (Rs)Price Target (Rs)
1Tata MotorsBuy432.75516
2TVS MotorsBuy1044.351303
3Ashok LeylandBuy149.3181
4Bajaj AutoBuy3684.64151
5Eicher MotorsBuy3453.754260
6Hero MotocorpBuy2817.63210
7M&MBuy1262.61550
8Maruti SuzukiBuy8997.9510965
Stocks With Positive Reco.
 

Stocks With Positive Reco.

Sr.NoStocksReco.CMP (Rs)Price Target (Rs)
1Escorts KubotaPositive2264.32503
2Mahindra CIE AutomotivePositive288.65378
3VST Tillers and Tractors Limitedpositive2435.52780
Robust performance by OEMs and ancillary companies in Q2

Robust performance by OEMs and ancillary companies in Q2

The Sharekhan universe of automobile companies performed strongly in Q2FY2023, with revenue and EBITDA reporting significant improvement during the quarter, led by robust domestic demand and softening raw-material prices. PVs and 2Ws2Ws were the key growth drivers for the quarter. 

Chips shortage issue to improve gradually going forward

The chips shortage situation is improving gradually although chips shortage continues to hurt revenue. Domestic and global OEMs expect chips shortage to gradually normalise over the next 1-2 years. 

Overall profitability to improve

The brokerage said, "We expect demand to remain buoyant for 2Ws, PVs, and tractors, driven by robust demand (rural as well as urban), new launches, and increasing traction for EVs. The commercial vehicle (CV) segment is expected to continue its upcycle, led by improvement in economic activities. Going forward, we expect margins to improve, driven by expected stability in input prices and operating leverage benefits. OEMs and auto ancillary companies may look to further pass input cost inflation to clients." 

Sector view - Positive

Sector view - Positive

Commenting on the sector, the brokerage said, "We remain positive on the automobile sector despite near-term challenges, rising inflation, and chip shortage. The passenger segment, both for 2W and four-wheelers (4W), is expected to remain strong, led by new launches and increasing traction for EVs. Rural demand is expected to drive sales of tractors and farm equipment, benefiting companies having a strong rural and semi-urban presence. Demand in urban regions continues to remain buoyant. We expect a sequential improvement in M&HCV sales to continue, driven by an expected rise in e-commerce, agriculture, infrastructure, and mining activities. We expect recovery in the CV segment to continue over the next few years, driven by improved economic activities, an affordable interest rate regime, and better financing availability. The bus and 3W segments are expected to improve gradually, as corporate offices and educational institutions open. Robust demand, easing supply constraints, and dropping commodity prices are likely to provide relief to auto OEMs and ancillary companies going forward. We stay Positive on the sector." 

According to the brokerage, the key risk would be the Worsening of a geopolitical situation can obstruct demand and export volumes.

Disclaimer

Disclaimer

The stocks have been picked from the brokerage report of Sharekhan. 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.

 

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