Maruti Suzuki, Ashok Leyland, M&M, TVS Motor: Auto stocks that analysts picked ahead of Dec sales data

A couple of brokerages have picked their top auto stocks, ahead of auto sales numbers for December. Analysts said demand for medium and heavy commercial vehicle (MHCV) remained healthy but the one for two-wheeler slowed to pre-festive levels, with no recovery in sight. They said passenger vehicle (PV) industry demand is also showing some signs of slowdown, with discounts on the rise. They cited weak demand in the entry car segment.

Nomura India said it prefers OEMs with strong model cycles driving market share gains, such as Mahindra & Mahindra (M&M),  TVS Motor and Ashok Leyland. The foreign brokerage said rising electrification and content per vehicle will be the key value drivers for suppliers, and maintained its preference for Sona Comstar, Uno Minda and Sansera Engineering.  Emkay Global likes Maruti Suzuki, MSIL, Eicher Motors, Escorts Ashok Leyland and TVS Motor.

For Nirmal Bang Institutional Equities, Maruti Suzuki remains its preferred pick in the PV segment, owing to strong new model pipeline, market share gains led by new models and plugging of product gaps, margin recovery, led by improvement in product mix, operating leverage benefits and moderation in commodity costs.

Motilal Oswal said it prefers four-wheelers over two-wheelers on the back of strong order book, traction for new model launches and a stable competitive environment. It prefers Maruti Suzuki and Ashok Leyland. Among auto component stocks, we prefers Motherson Sumi and Bharat Forge.

Emkay Global said PV volumes are likely to decline sequentially on production constraints. Supply constraints are persisting due to electronic component shortages, which may continue in the subsequent months, it said. Among OEMs, it estimates domestic volumes to grow 64 per cent  YoY for M&M and 25 per cent for Tata Motors while declining slightly by 4 per cent for MSIL due to six-day maintenance shutdown. Blended vehicle discounts have increased on MoM basis due to seasonality but remain lower than the peak levels seen in the past, it said.

Nirmal Bang said two-wheeler demand still continues to be affected by a delayed recovery in the rural markets and it is expected to decline by mid single-digit.

For Hero Moto, it expects the focus to remain on 125cc models where the company intends to gain market share. Enquiries for its premium variants (Xtec) are relatively better, it said.

“Overall, dealers expect the sales traction to continue going ahead for Royal Enfield. In the urban markets, we have seen demand for scooters outpacing the demand for MCs, benefitting sales for Honda (HMSI) and TVS. TVS dealers indicated some improvement in supplies for Raider and Apache over November. Bajaj Auto has recently launched Platina 110 ABS, which is a first for a entry segment MC , and it is aggressively priced against the Splendor 100cc. Dealers expect the Platina to make up for the lost sales of CT100. Overall inventories remain at comfortable level of 25-40 days across OEMs,” it said.

In CVs, demand remains robust for both cargo as well as passenger segments, it said adding that freight availability also remains good, thus driving retail volume growth of 12-14 per cent, it said.

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