7 Auto Stocks To Buy According To Emkay Global Financial Report

Positive on the auto sector: Emkay Global

In Q2FY22, Emkay Global expects aggregate revenue for Automobile firms to grow by only 6% YoY, as volume growth was hampered by chip shortages in PVs and a high base in 2-Wheelers/Tractors. CVs, on the other hand, had a strong volume performance. However, earnings are anticipated to be harmed due to temporary volume difficulties and cost pressures.

As a result of chip shortages, the brokerage believes that domestic PV industry volumes increased by only 2% year over year. We anticipate a 2% revenue increase for MSIL and 14% for the MM auto division (total revenue growth of 8% for MM). It also expects volume to improve in H2 as a result of the pending order book and increasing chip supplies.

7 Auto Stocks To Buy According To Emkay Global Financial Report

Auto company	Market price	Target price	Likely gains %
Ashok Leyland	Rs 130	Rs 155	19%
Baja Auto	Rs 3,771	Rs 4,420	17%
Hero MotoCorp	Rs 2,801	Rs 3,790	35%
TVS Motor	Rs 544	Rs 780	43%
Atul Auto	Rs 221	Rs 300	36%
Maruti Suzuki	Rs 7,199	Rs 8,600	19%
Tata Motors	Rs 336	Rs 400	19%

Auto stocks to buy according to the automobile report

Ashok Leyland

Emkay Global has initiated a buy call on Ashok Leyland with a target price of Rs 155, implying a 19 percent upside potential. Ashok Leyland is currently trading at Rs 130.

According to brokerage, revenue is expected to expand considerably year over year, thanks to volume growth of 42 percent on a low base and realisation growth of 10 percent. Despite the increased scale, the EBITDA margin is likely to remain constant due to delays in commodity inflation pass-through.

Baja Auto

The brokerage believes that with a 9 percent year-over-year increase in volume and a 13 percent increase in realization, revenue growth could be strong. Despite a drop in the home market, volume increased due to a 28 percent increase in exports. Due to delays in the pass-through of commodity inflation, the EBITDA margin may fall.

Hero MotoCorp

Revenues are predicted to fall by 20% year over year due to fewer volumes. Due to price increases, realization is expected to increase by 6%. Due to lower scale and delays in commodity inflation pass-through, the EBITDA margin may fall.

Emkay Global has initiated a buy call on Hero MotoCorp with a target price of Rs 3,790, implying a 35 percent upside potential. It is currently trading at Rs 2801.

TVS Motor

Emkay Global has initiated a buy call on TVS Motor with a target price of Rs 780, implying a 43 percent upside potential. TVS Motor is currently trading at Rs 544.

With volume up 6% year over year and realization up 11%, revenue growth should be strong. Despite a drop in the home market, volume increased because to a 46 percent increase in exports. Due to delays in the pass-through of commodity inflation, the EBITDA margin may fall.

Atul Auto

Emkay Global has initiated a buy call on Atul Auto with a target price of Rs 300, implying a 36 percent upside potential. It is currently trading at Rs 221.

A 10% year-over-year rise in volume could help sustain revenue growth. Due to delays in the pass-through of commodity inflation, the EBITDA margin may fall, according to the brokerage.

Tata Motors

“JLR’s GBP revenue is likely to fall 13% yoy to GBP3.8bn, due to lower volumes (-15%). EBITDA margins should contract by 590bps to 5.2%, due to negative operating leverage and the absence of furlough benefits. Standalone revenue should grow strongly by 94% to Rs187.7bn, driven by higher volumes (55%) and realization (25%). EBITDA margin should expand 480bps to 5.9% on a better scale,” the brokerage has said.

Maruti Suzuki

Revenues should increase by a small amount, owing to higher realizations (6 percent yoy). Volumes fell 3% year over year. Due to lower scale and delays in commodity inflation pass-through, the EBITDA margin is expected to decline.

Disclaimer

The above stocks are picked from Emkay Global Financial Services’ latest report on the auto sector. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies Pvt Ltd, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. The above article is for informational purposes only.