Tata Motors, Ather, M&M, Ashok Leyland: Emkay Global sees up to 58% upside in select auto stocks

Emkay Global in a auto sector note picked Tata Motors Ltd (TMCV) as its top auto pick, saying demand sustenance in H2 will be a key monitorable. The domestic brokerage suggested 'Buy' rating on at least nine auto stocks, up with up to 58 per cent upside targets. It likes Ashok Leyland as MHCV demand remained robust and margins is expected to improve from H2. 

In the two-wheeler segment, the domestic brokerage said it likes TVS Motor Ltd as premiumisation and EVs to drive long-term growth. It also likes Ather Energy Ltd amid a decisive move to catalyze EV adoption and leadership in two-wheeler. Hyundai Motor India Ltd and Mahindra & Mahindra Ltd (M&M) are Emkay's four-wheeler picks. 

Overall, Emkay Global said commercial vehicle (CV) remained the strongest segment, with demand underpinned by a robust freight environment, as reflected in OEMs’ ability to implement consecutive price hikes without impacting demand. 

"With Navratri/Dussehra in Oct and Diwali in Nov, the staggered festive calendar should support broad-based demand momentum despite a high base. The current cycle appears structural, supported by stretched replacement cycles and easing GST pressures, with a broad-based demand upcycle across CVs/PVs/2Ws," Emkay Global said. 

Emkay suggested a target of Rs 700 on Tata Motors, implying 58 per cent potential upside. Its target on Ashok Leyland at Rs 240 suggested 47.4 per cent upside and Rs 4,000 on Escorts suggested 42.9 per cent upside.  

Among two-wheeler stocks, Emkay suggested a target of Rs 2,200 on Ather Energy Ltd, hinting at 36.6 per cent potential upside. M&M's target is set at Rs 4,100, suggesting 34.3 per cent upside. Hyundai Motor, another 'Buy' is given a target of Rs 2,600, hinting at 26 per cent upside.  

Emkay said two-wheeler demand is broad-based and increasingly rural-led, with retail pull evident despite supply constraints.

"CV demand appears structural, with growth in both volumes and value as fleets upgrade to higher-tonnage trucks (49T vs 40T). Broad-based growth is visible across sub-segments, with bus order books exceptionally strong and both TMCV and AL similarly stretched, including sizeable EV bus backlogs," Emkay said.

The PV momentum, it said, remained healthy, aided by GST-led price corrections reviving interest in entry models, primarily catered to by MSIL and TMPV, as consumers remain price-sensitive yet feature-conscious.