260-5,000% Dividends Payout: 5 Auto Stocks Recommended To Buy For TP Of Rs 232-13,538; Do You Own Any?

Auto companies have announced their sales numbers for February month, where volumes were driven by passenger cars and two-wheelers, however, demand for tractors was unenthusiastic. As per Antique Stock Broking, the February 2024 sales numbers were ahead of their estimates, which showed broad-based growth across OEMs. Accordingly, the brokerage's preferred picks in the OEM segment are Maruti Suzuki, Ashok Leyland, and Hero Motocorp. It also has recommended buying Mahindra & Mahindra and Eicher Motors.

In its research note, analysts at Antique said, "Overall, auto OEMs reported strong volumes in Feb-24 driven by PVs and 2Ws, however, tractor demand continued to be weak. Volumes grew by 18%/ 24% in PVs/ 2Ws on a YoY basis while for CVs volumes were flattish and tractors volumes declined by 16% YoY."

Further, the brokerage highlighted that "the 3W segment also grew well at 16% YoY. 2W volumes were ~10% ahead of our estimates due to higher than expected export volumes which we believe were mainly due to aggressive channel filling by OEMs in the international market in anticipation of the prolonged Red Sea crisis."

On company-wise, Antique's note said, "Hero MotoCorp's volumes grew 19% YoY indicating a recovery in the entry segment as well.

Also, they pointed out that retail growth across segments was broadly flattish on a sequential basis. The numbers were ahead of their estimates in PVs, which showed broad-based growth across OEMs.

In CVs, the brokerage's note said, "The overall growth was flattish on a YoY basis which was slightly above our estimate where weak MHCV volumes were offset by the LCV segment."

Moreover, the brokerage added, "Exports in Feb'24 showed strong growth across segments with players like MSIL, TVS, and HMCL posting the highest-ever export volumes this month, however, we expect this volume to be one-off due to aggressive inventory built up in anticipation of increasing freight costs ahead due to the Red Sea crisis. Inventory levels seem to have normalized now."

Under PVs, the brokerage expects the entry-level segment to gradually recover from here on. M&M and Tata, both saw decent volumes driven by their new launches doing well, while M&M's volumes were mainly driven by its robust order book, while Tata Motors' volumes grew driven by its new launches led by Nexon and Punch EV. Tata's EV volume showed strong growth as Punch EV has been received well. MSIL reported a volume of 197k, M&M 44k, and TTMT 51k.

In the case of 2-wheelers, the brokerage anticipates continued robust demand to be driven by the marriage season and replacement demand. TVS sold ~18k IQube in Jan-24 vs. 16k in Feb-23. TVS was at 358k, Bajaj Auto's volume came in at 295k units and RE reported ~76k units.

For commercial vehicles, the brokerage took note that the underlying demand drivers for MHCV (infrastructure spending driving freight availability and healthy fleet operators' profitability) are in place and will support demand in FY24, however, we believe there will be a short-term hiccup in demand due to the general elections. Tamo, AL, and VECV's reported volumes stood at 35k, 17k, and 7k respectively.

Finally, on tractors, the brokerage expects demand to taper off largely due to the higher base effect. OEMs expect some positive green shoots of demand led by good Rabi sowing and favourable government incentives. Mahindra's volume stood at 21.6k units vs. its expectation of 24k units.

As of now, Antique has recommended buying 5 auto stocks after their February month sales. It also needs to be noted that these companies are also high dividend-paying stocks in the auto segment. Here are the target prices set by Antique:

Ashok Leyland: The target price is set at Rs 232 on Ashok Leyland: In the last 12 months, the company paid dividends up to 260% amounting to Rs 2.60 per share. Currently, it has a dividend yield of 1.52%.

Eicher Motors: On the Royal Enfield maker, the target price is set at Rs 4,764. The company paid dividends up to a whopping 3,700% amounting to Rs 37 per share. It has a dividend yield of 0.98% currently.

Hero MotoCorp: On the two-wheeler giant, Antique sets a target price of Rs 5,389. Recently, last month, Hero MotoCorp paid up to 5,000% dividends valuing to Rs 100 per share. It has a dividend yield of 2.16%.

Mahindra & Mahindra: For Mahindra Group's flagship company, the brokerage set a target price of Rs 1,846. This auto player paid a dividend to the tune of 325% in the last 12 months, valuing it at Rs 16.25 per share. Currently, it has a dividend yield of 0.82%.

Maruti Suzuki: The largest auto company in terms of market share, Maruti has a target price of Rs 13,538. Dividends up to 1800% were paid by Maruti in the last 12 months. It has a dividend yield of 0.78%.

Disclaimer: The write-up highlights about the latest development in stock split, and is not a recommendation to buy, sell or hold. We have not done fundamental or technical analysis and have no opinion on the stock mentioned. Neither, the author nor Greynium Information Technologies should be held liable for any losses. Please consult a professional advisor.