Stocks To Buy: 9 Stocks From The Auto Space Recommended By Prabhudas Lilladher

Prabhudhas Lilladher has come out with its latest report on the automobile space. Here are a few stocks from the report, where the brokerage has a buy call. Among these stocks include names like Tata Motors, TVS Motors, Maruti etc.

Tata Motors, M&M will do well in the SUV space

According to the brokerage, premiumisation trend will continue to play out across segments. "In PVs, OEMs (with focus on SUVs like Tata Motors and M&M) will continue to do well. In 2Ws, Eicher Motors and TVS will fare better than others led by premium bikes/scooters in its portfolio and new model launches. Our top picks are Ashok Leyland, Mahindra and Eicher Motors," the brokerage has said.

9 Stocks where the brokerage has a buy call

Prabhudas Lilladher has recommended buying the stock of Ashok Leyland with a price target of Rs 200), whereas it also has a buy call on Bharat Forge with a price target of Rs 875. Other stocks to buy are Eicher Motors (price target Rs 4225), Hero Moto Corp (Rs 3175), M&M (TP Rs 1500), Tata Motors (target price Rs 570), TVS Motors (target price Rs 1085), Endurance (Rs 1590).

"We expect revenue expansion of 9% QoQ for our auto OEM coverage universe led by 10% improvement in volumes. Volumes have grown across segments (2Ws - +10% QoQ, PVs - +15% QoQ, CVs - +4% QoQ) as supply chain issue is now easing out and consumer sentiments are at a high-point due to post-COVID festive season, thereby leading to pent-up demand," the report adds. 

Concerns of OEMs with exposure to global markets

According to Prabhudas Lilladher, there remains concern for OEMs with exposure to global markets owing to inflationary scenario across countries and rate hikes. "We reduce our target P/E multiple for Bajaj Auto (17x to 16x), Bharat Forge (30x to 28x) and Endurance (30x to 27x) to factor in fear of global recession. We roll forward and now value all our stocks on Sep-24E. We value Maruti Suzuki on 26x Sep-24E EPS with a target price of Rs 9,500 (inline with its long term average, 28x earlier). The stock is trading at 37.3/26.5/21.5x on FY23/24/25E EPS," the brokerage has said.

Accumulate rating on the stock of Ceat Ltd

The brokerage also assigned 'Accumulate' rating to CEAT (Under Review earlier). "The company is expected to witness better margins in 2HFY23, led by recovery in demand and easing of commodity prices. We expect OEM demand to remain strong from PV and 2W segments. Export momentum is expected to continue, on the back of new products and improving distribution reach in US and Europe. However, growth in replacement segment (55-60% of the mix) is slower than OEM segment," the report adds.