A lot changed for the markets amid geopolitical tensions between Russia and Ukraine. Global markets fell sharply and FIIs were net sellers in Indian markets for five months in a row. A spike in energy prices had the markets worried and there are concerns about inflation. The domestic economy has recovered from the third wave of the pandemic and auto sales numbers, especially in the passenger vehicle segment and the commercial vehicle segment have increased significantly.
Angel one has given a buy call on these stocks in the Auto Sector on March 8th 2022:
Ashok Leyland Ltd
Ashok Leyland is a flagship company of the Hinduja Group and the second-largest manufacturer of commercial vehicles in India and the fourth largest manufacturer of buses in the world.
The demand for MHCVs (Medium and heavy commercial vehicles) was adversely impacted due to multiple factors like changes in axel norms and an increase in prices due to the implementation of the BS6 norms.
An improvement in business sentiments along with spending on infrastructure are
likely to drive demand in the medium term and the analysts believe that the company will be the biggest beneficiary of the Government’s voluntary scrappage policy.
- CMP: ₹ 106.60
- Target Price: ₹ 164
- Upside: 54%
- Beta: 1.5
- 52-week High/Low: ₹ 153/ ₹ 102
Sona BLW Precision Forgings Ltd
It is one of India’s leading automotive technology companies and it derives ~40% of its revenues from the electric vehicles segment. It has a strong market share of 55-90% for differential gears for passenger vehicles, Commercial vehicles and OEMs in India.
The analysts believe that given the traction in the BEV/Hybrid Vehicle space, the company will continue to command higher a higher multiple which is justified by higher earnings.
- CMP: ₹ 574.85
- Target Price: ₹ 843
- Upside: 47%
- Beta: 1.5
- 52-week High/Low: ₹ 839/ ₹ 295
Ramkrishna Forgings Ltd
It is a leading forgings player in India that stands to benefit from a favourable demand outlook for the MHCV segment. The company has been able to add new products and has phased out its CAPEX over the past few years.
Its operating leverage is good and the analysts expect a ~550 YoY bps EBITDA margin improvement in FY22E
- CMP: ₹ 828.00
- Target Price: ₹ 1284
- Upside: 55.07%
- Beta: 1.3
- 52-week High/Low: ₹ 1260/ ₹ 485
Suprajit Engineering Limited
It is the largest supplier of automotive cables to domestic OEMs with a presence across two-wheelers and passenger vehicles. It has outperformed the Indian Auto industry in recent years. It boasts of a strong balance sheet and is a prime beneficiary of a ramp-up in production by OEMs across the globe. Owing to its strong outlook and top-grade quality of earnings, analysts have given the following targets:
- CMP: ₹ 292.95
- Target Price: ₹ 485
- Upside: 66%
- Beta: 1.3
- 52-week High/Low: ₹ 474/ ₹ 241
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