In the fag-end of last week which brought a massive sell-off in Dalal Street, one sector that managed to add wealth into investors’ kitty was automobile and auto ancillary.
Major stocks in this pack not only managed to buck the weak market trend but also gave strong double-digit weekly returns.
The S&P BSE Auto index was the best performer, adding about 3% gains on a week-on-week basis.
Besides auto, IT was the only other sectoral index to have given positive weekly returns.
The big gainers in the auto and auto ancillary pack include
, , Co, , TVS Motor Co, , , and Forging. These stocks gained 3-11% last week.The strong gains in the pack were backed by the robust earnings posted by companies.
Maruti Suzuki’s net profit doubled on year in the December quarter while the operating profit per vehicle was at a 17-quarter high.
Another four-wheeler major Tata Motors surprised the Street by posting a profit for the first time in 7 quarters with the improved performance of arm Jaguar Land Rover.
In the two-wheeler space, Bajaj Auto too, saw an improved performance with the operating profit touching an 8-quarter high.
Not only automobile makers, the equipment makers too, saw robust growth in the third quarter. Sona BLW reported a strong 39% YoY growth in revenue to Rs 685 crore, with battery electric vehicles accounting for 26% of the revenue.
What should investors do?
Following the strong earnings, analysts are bullish on the sector and see the trend continuing given the prospects for vehicle demand and the growing traction in the electric vehicle space.
Brokerage
has a “buy” rating on Sona BLW with a target price of Rs 700. It believes that the company’s diversified revenue, increasing share of EVs and strong order book makes it one of the best play in the EV space.
Most brokerages are bullish on
and see scope for the company to improve its market share.
According to Nuvama Institutional Equities,
Suzuki will benefit from a strong franchise, favourable product mix, and commodity benefits which will offset margin concerns.
The strong earnings from Tata Motors prompted brokerage ICICIdirect to upgrade the stock to ‘buy’ from ‘hold’ and set a target price of Rs 530, signalling an upside potential of 19% from current levels.
Dominant position in domestic electric passenger vehicle space with Nexon EV as its most popular product with Harrier EV and Sierra EV slated for launch in 2025, coupled with the debut of Altroz and Punch CNG versions are the positives for Tata Motors, according to the brokerage.
Further, JLR looks also set to embrace the EV trend with Jaguar going all-electric by 2025.
(Data inputs from Ritesh Presswala)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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