Tata Motors, Maruti Suzuki, Bajaj Auto, M&M: Auto shares that analysts like ahead of Feb sales data

Ahead of auto sales data for February, dealer checks by brokerages hint at likely year-on-year growth in two-wheeler (2W) and domestic passenger vehicle (PV) segments and de-growth in commercial vehicle (CV) and tractor segments. Analysts said dealer inventory was high in PVs compared to the two-wheeler segment and that OEMs were focusing on premiumisation, as new features are attracting a new set of customers.

In its sales preview note, Sharekhan said it likes Tata Motors, Bajaj Auto, Maruti Suzuki India Ltd and Hero MotoCorp. It said retail uptick in the two-wheeler segment continued, though the pace has been moderating post the festive season. The February demand will be supported by new product launches with attractive features, it said.

Enquiries in the PV segment have been steady, though booking trends and waiting period are moderating on the increase in the availability of demanding models, it said adding that tractor and CV segments may register fall YoY to the high base and demand moderation.

Motilal Oswal expects the 2W segment to post retail growth of 8-10 per cent. It sees PV retail growth at 3-5 per cent YoY, driven by order book execution in SUVs, even as there are still no signs of improvement in the entry-level car segment, except for CNG variants.

"CVs are seeing subdued demand due to a slowdown in new orders before the elections, although discounts remain stable," it said.

Motilal Oswal said it is positive on the PV segment as it is expected to see better earnings growth, led by improved mix. While the 2Q segment is expected to outperform other segments with high-single-digit volume growth, most of the growth seems already priced in the recent run-up of stocks.

"Also, we expect CV growth to moderate in the near term due to elections and then pick up in H2FY25. M&M and Maruti Suzuki India are our top OEM picks," it said.

Nuvama expects double digit growth for two-wheeler players and said the mass-market OEMs such as Hero MotoCorp, Bajaj Auto and TVS Motor may outpace Eicher Motors Royal Enfield (EIM-RE) in February sales .

Among PV OEMs, it expects positive growth, and Mahindra & Mahindra to outpace Tata Motors and Maruti Suzuki India. In CVs, a drop is likely on a high base (pre-buying before OBD2 transition) for all OEMs. In tractors, all OEMs are likely to decline on high base (inventory filling before festive season) and weak sentiments in south/west regions.

This brokerage prefers Escorts, Hero MotoCorp and M&M shares.

 

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