Stocks To Buy This Week: Here Are The 2 Pick of The Week By Axis & HDFC Securities

Axis Securities and HDFC Securities, two of India's largest brokerage houses, have announced their stock picks for the week. While Axis Securities has chosen Automotive Axles as its pick of the week, HDFC Securities recommended buying shares of LG Balakrishnan & Bros. To determine which of these two stocks has higher upside potential, let's compare them.

Automotive Axles Target Price

Target: Rs 1,935, Current market price: Rs 1,800.40

Here's the rationale behind the buy call recommendation on Automotive Axles as per Axis Securities.

• Industry Outlook: We expect the MHCV production volumes to see mid-single-digit YoY growth post H2FY26 (~400 MHCV volumes). As per the management, a gradual recovery in Europe and the US is expected to improve CV volumes CY27 onwards.
• EBITDA Improvement: Industry registered 8.6 Mn tonnage in FY25 vs 8.7 Mn tonnage in FY18-19 (peak); however, only 10.3 Lc units were produced in FY25 vs 11.1 Lc units in the respective periods. This clearly indicates a shift to higher tonnage per vehicle, resulting in better EBITDA/axle realisation by up to 25% from FY19. The company has entered into a new business model and a Service Agreement with Meritor HVS (India) Limited, wherein Auto Axles will sell the products directly to original equipment manufacturers with effect from 1st April, 2025. We believe this to be margin accretive and improve cash flows for the company.
• Long-term Growth Drivers: (1) Product diversification into new bus axles, with commercial production of axles for 13.5/15 mt buses expected to commence by the end of FY26, subject to finalization of commercial agreements with end-user OEMs; (2) Electric vehicle (EV) axles; (3) Increased export share following plant modernisation, with parent company Meritor is expected to play a vital role; (4) Expansion of the aftermarket business.
• Outlook & Valuation: The CV industry has experienced higher tonnage growth over the last two years despite production volumes remaining below the peaks of FY19. Looking ahead, we anticipate positive volumes in the goods carrier segment in H2FY26E, while the passenger carrier CV segment is expected to achieve mid-single-digit growth. We forecast an EBITDA CAGR of 19% for FY25-27E, supported by direct sales to OEMs (earlier via Meritor), new product launches, and cost control efforts, assuming similar commodity price levels.

LG Balakrishnan & Bros Target Price

Recommendation: Buy in Rs 1360-1400 band and add on dips in Rs 1250-1270 band, Base Case Fair Value: Rs 1515, Bull Case Fair Value: Rs 1640, Time Horizon: 2-3 quarters

As per HDFC Securities, LG Balakrishnan & Bros (LGBB) is looking to expand its operations and diversify its revenue, de-risking from geographical issues cropping up due to the imposition of tariffs on various countries by the US. The $10 million Mexico facility and planned forays into Vietnam/Thailand could open new markets and customer bases, buffer against macro risks in India, and increase exports.

"With the auto sector showing cyclical strength and demand in industrial applications rising, the topline trajectory appears promising. Continued cost vigilance and execution in international geographies will be important for profit accretion. We expect LGBB's Revenue/PAT to grow at 11/19% CAGR over FY25-FY27, led by increased content per vehicle in both the PV and CV segments, improvement in JV profitability and operating leverage. We believe investors can buy the stock in Rs 1360-1400 band and add on dips in Rs 1250-1270 band (10x FY27E EPS) for the base case fair value of Rs 1515 (12x FY27E EPS) and the bull case fair value of Rs 1640 (13x FY27E EPS) over the next 2-3 quarters," said HDFC Securities in a report.

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