A good start to FY17 for auto companies; Maruti Suzuki, Ashok Leyland among 6 stocks to bet on

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Updated: May 4, 2016 4:14:18 PM

Sales figures released by auto companies for the month of April 2016 showed healthy performance, better than expected on year-on-year (yoy) as well as month-on-month (MoM) basis for all segments.

april car sales auto stocks to buy in 2016Auto stocks: Sales figures released by auto companies for the month of April 2016 showed healthy performance, better than expected on year-on-year (yoy) as well as month-on-month (MoM) basis for all segments. (Photo: Reuters)

Sales figures released by auto companies for the month of April 2016 showed healthy performance, better than expected on year-on-year (yoy) as well as month-on-month (MoM) basis for all segments. For the top-five players in the domestic market according to April sales, the growth in domestic sales has been 16 per cent yoy, which is highest in the last six months.

Medium and heavy commercial vehicles (M&HCV) continued growth in double digit in the month of April 2016. Two wheelers players also reported healthy yoy growth. Passenger vehicles also recorded double-digit growth in the month. Moreover, tractors and light commercial vehicles also recorded high growth.

According to Karvy Stock Broking, “Marriage season and auspicious Navratra benefitted monthly volume to some extent. Moreover, inventory build up for upcoming Akshay Tritiya also benefitted to some extent. Sales performance during the month was supported by traction in urban market despite rural sales remaining muted.”

Sales of passenger vehicles — cars, vans and utility vehicles — surged over 12 per cent in April, thanks to the popularity of newly-launched models and a low base effect. The industry is estimated to have sold 237,149 units in April this year (based on data available for the top 10 players). Maruti Suzuki and Mahindra & Mahindra reported double-digit growth in domestic sales to dealers. Tata Motors reported a growth of eight per cent after months of decline, thanks to the newly-launched Tiago.

Two-wheelers also posted strong volumes with major players like Hero MotoCorp and TVS Motor showing double-digit growth.

Country’s largest two-wheeler maker Hero MotoCorp reported 14.89 per cent increase in sales at 6,12,739 units in April. The company had sold 5,33,305 units in April 2015. TVS Motor Company reported a 16 per cent increase in total sales at 2,27,096 units in April.

On the outlook of auto industry, DK Aggarwal, chairman and managing director, SMC Investment and Advisors said, “Monsoon will play a crucial role for auto industry going forward. Overall, I am bullish on the industry. Maruti Suzuki, Bajaj Auto and Mahindra & Mahindra (M&M) can give good return to investors in the next 12 months.”

Maruti Suzuki India (MSI) posted a 13.3 per cent rise in total sales in April at 1,26,569 units as against 1,11,748 units last year. G Chokkalingam, founder, Equinomics Research & Advisory, “Maruti Suzuki shares can jump 10-15 per cent in the next 6-7 months from present levels.”

Chandan Taparia, derivatives and technical analyst, equity research, Anand Rathi Financial Services said, “An investor can buy M&M for a target price of Rs 1,400. TVS Motor and Ashok Leyland are other good bets which an investor can consider for medium-to-long term.”

Religare Capital Markets has ‘Hold’ rating on TVS Motor Company. The share price of TVS Motor slid 10 per cent on Tuesday.

Sharekhan prefers Maruti Suzuki, Ashok Leyland and Hero MotoCorp among the auto stocks under its coverage.

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