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auto stocks: Top auto stocks to buy before Q1 earnings and as demand recovers

auto stocks: Top auto stocks to buy before Q1 earnings and as demand recovers
NEW DELHI: Most analysts are bullish on auto stocks as Q1 volumes rebound in all segments and supply-side issues appear to be easing, with semiconductor supply improving. Led by rallies in , MRF, Mahindra & Mahindra, Hero Moto and , the Nifty Auto index is up more than 8 percent in the past month.

HDFC Securities expects M&M to be the top-performing auto company in the first quarter, with an estimated 41 percent growth in quarter-over-quarter (QoQ). “This strong performance is likely driven by a sharp shift in the mix into the high margin tractor segment (44 percent of the Q1 total of 32 percent QoQ). Even car volumes have remained stable quarter on quarter, given the strong backlog and the impact of the chip shortage that is gradually easing,” it said in a report.

Hero MotoCorp is also expected to deliver 10 percent quarter-on-quarter earnings growth, driven in large part by volume growth of 17 percent on a low basis as demand in rural areas has surged.

After operating in a troubled environment for the past three to four years, auto companies are witnessing signs of a rising tailwind. “While the demand recovery is expected to continue on a low basis, commodity prices have begun to moderate, although the benefit may come with some delay. While fuel prices have fallen from peak levels, a rise in interest rates could have some effect on demand,” domestic brokerage

said.

It expects 2W/PV/Tractor volumes to register 9.6 percent/13.5 percent/7 percent CAGRs over FY22-25E, while 3Ws/LCVs/M&HCVs are expected to register 10 percent/17%/21 percent Register.

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Sharekhan expects Q1 to be a moderate quarter with flat QoQ growth and a 30 percent year-over-year revenue increase. “Car accessories companies would fare relatively well compared to OEMs, due to revenue diversification and strong traction in the EV and technology verticals,” it said.

Top picks in the automotive sector
Motilal Oswal likes and Ashok Leyland among OEMs. Within auto components, it prefers and .

HDFC Securities has BUY ratings on Hero MotoCorp, TVS Motors and

within OEMs and Bharat Forge within related companies. It has ADD ratings for , Maruti Suzuki and Apollo Tires.

Sharekhan’s favorite picks are Bajaj Auto, Hero MotoCorp, Tata Motors, M&M, Escorts, Bosch,

Mahindra CIE, , , Gabriel India, , and Apollo Tires

Yes Securities has buy ratings from Tata Motors, Ashok Leyland,

and Sona BLW.

Within the Nifty Auto package,

rose the most – 31 percent, followed by Bosch (19 percent), TVS Motor (15 percent) and MRF (13 percent).

(Disclaimer: Recommendations, suggestions, views and opinions of the experts are their own. They do not represent the views of Economic Times)