Stocks to Buy: Eicher Motors, Tata Motors, M&M, Ashok Leyland are the 4 Ambits picks in the Automobiles sector

Tractors, 2 wheelers, LCV amended placed

Ambit Research successful the OEM's prefers tractors implicit 2 wheelers and airy Commercial Vehicles. These nevertheless arsenic per Ambit Research are amended placed compared to Medium and Heavy Commercial Vehicles and rider vehicles too. 

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Tractors, 2 wheelers and airy Commercial Vehicles arsenic per Ambit Research are amended placed arsenic the request successful the segments is turning favorable,. Further the competitory strength is favorable and Ambit feels that these segments person amended net maturation prospects. In summation little Capex strength is starring to amended Free currency travel conversion.

Passenger Vehicles arsenic per Ambit volition proceed to spot K shaped recovery, with request for SUV's remaining strong, But the SUVs conception volition besides person highest competitory and capex intensity.

Medium and Heavy Commercial Vehicles (MHCV) conception is astatine the crossroads with estimates of muted measurement maturation (a imaginable measurement diminution successful FY27 is besides estimated by Ambit.  Pricing subject ,till it lasts would thrust net maturation for the MHCVs

Stock Picks- 

Ambit Research prefers OEMs with amended segmental outlook, company-specific gross & borderline triggers, little hazard of disruptions, and tenable valuations.

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Eicher Motors- OEMs person seen a crisp rerating implicit the past 12 months driven by an improving request outlook contempt the summation successful EV risk. As per Ambit Bajaj Auto is trading astatine 73% premium to 1 twelvemonth guardant mean terms to earnings, TVS Motor Company (42% premium) and Hero Motocorp (29% premium). While these stocks are already trading astatine a premium to Long Period Average multiples too,  Eicher Motors is trading astatine a 12% discount to Long word mean multiples   owed to slower maturation and expanding contention and hence Eicher remains the prime of Ambit. Target terms of Ambit for Eicher Motors stock terms stands astatine ₹5599.

Ashok Leyland- Ashok Leyland arsenic per Ambit tin leverage electrification to amended its positioning successful Light Commercial Vehicles  and would person 2 offerings by 2nd fractional CY24. With the absorption connected profitability, pricing subject is driving margins and the guidance suggests further scope for borderline upgrades. With pricing subject offsetting the uncertainty of demand, valuations of Ashok Leyland arsenic per Ambit are tenable astatine 11 times 1-year guardant Enterprise Value to Ebitda and implied 10-year measurement CAGR (compound yearly Growth rate) astatine Current marketplace terms is 4.3%. Ambit's 1 twelvemonth people terms for Ashok Leyland stands astatine ₹266.

Mahindra & Mahindra- M&M is expected to occurrence connected each 3 cylinders successful  FY25 arsenic per Ambit. In SUVs, M&M has achieved marketplace enactment with its 'SUV halfway brand' strategy. In Light Commercial Vehicles M&M leads the largest conception of 2-3.5 tons, which is gaining prominence. With the valuation discount mostly corrected, returns arsenic per Ambit volition beryllium  driven by halfway Earnings per stock  growth (13% CAGR FY24-27), with occurrence successful EVs and ramp-up successful workplace machinery being cardinal catalysts for banal rerating. Ambit has initiated sum with BUY ratings  and just worth of ₹3,284 ,

Tata Motors- The Medium and Heavy Commercial Vehicles concern of Tata Motors is borderline focused amid request uncertainty, portion the LCV concern aims to revive marketplace stock driven by merchandise actions including Electric Vehicles. For FY25 Ambit estimates Jaguar Land Rover (JLR) and Commercial Vehicles segments to spot mean growth, with India Passenger Vehicles benefiting from upcoming merchandise launches. Rerating catalysts arsenic per Ambit see the abstracted listing of Commercial Vehicles and Passenger Vehicles businesses, and JLR's palmy luxury pivot. Ambit has initiated sum connected Tata Motors with a with Buy and a just worth for Tata Motors banal astatine ₹1,064 .'

Disclaimer: The views and recommendations made supra are those of idiosyncratic analysts oregon broking companies, and not of Mint. We counsel investors to cheque with certified experts earlier taking immoderate concern decisions

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Published: 28 Jun 2024, 02:22 PM IST