Sharekhan Positive On Automobile Sector, Picks 19 Stocks With Buy Call & Positive On 3 Stocks
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
Sr.No | Stocks | Reco. | CMP | Price Target |
---|---|---|---|---|
1 | Alicon Castalloy Limited | Buy | 1006 | 1159 |
2 | Apollo Tyres | Buy | 315 | 343 |
3 | Bosch | Buy | 16946.8 | 19795 |
4 | Exide Industries | Buy | 184.6 | 215 |
5 | Gabriel India | Buy | 193 | 217 |
6 | GNA Axles | Buy | 665.8 | 841 |
7 | Greaves Cotton | Buy | 147.85 | 212 |
8 | Lumax Auto Technologies | Buy | 268.85 | 356 |
9 | Ramkrishna Forgings | Buy | 222.05 | 279 |
10 | Sundram Fasteners | Buy | 929 | 1110 |
11 | Suprajit Engineering | Buy | 343.25 | 386 |
OEM Stocks - Stock, CMP, & Target Price
Sr.No | Stocks | Reco. | CMP (Rs) | Price Target (Rs) |
---|---|---|---|---|
1 | Tata Motors | Buy | 432.75 | 516 |
2 | TVS Motors | Buy | 1044.35 | 1303 |
3 | Ashok Leyland | Buy | 149.3 | 181 |
4 | Bajaj Auto | Buy | 3684.6 | 4151 |
5 | Eicher Motors | Buy | 3453.75 | 4260 |
6 | Hero Motocorp | Buy | 2817.6 | 3210 |
7 | M&M | Buy | 1262.6 | 1550 |
8 | Maruti Suzuki | Buy | 8997.95 | 10965 |
Stocks With Positive Reco.
Sr.No | Stocks | Reco. | CMP (Rs) | Price Target (Rs) |
---|---|---|---|---|
1 | Escorts Kubota | Positive | 2264.3 | 2503 |
2 | Mahindra CIE Automotive | Positive | 288.65 | 378 |
3 | VST Tillers and Tractors Limited | positive | 2435.5 | 2780 |
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
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
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.