Jefferies is positive on the Indian automobile sector and its big bets include M&M, Eicher Motors and TVS Motor. The brokerage firm expects volumes of two-wheelers and tractors to grow at 13-15% CAGR over the next two fiscal years. Further, it believes that the volumes of two-wheelers and tractors will outpace that of passenger vehicles and trucks during the same time frame.

M&M

The brokerage firm has a ‘Buy’ call on the stock with its target price raised to Rs 4,075 per share from Rs 3,700. That implies there is a room for 30% upside from current levels. The stock has given a return of 2.2% in the past one month. 

M&M has revealed the prices of Mahindra XEV 9e and BE 6. The fully-loaded Pack Three variant with the 79 kWh battery of the Mahindra XEV 9e is Rs 30.90 lakh and the top-spec Pack Three trim of the BE 6 is Rs 26.9 lakh (both prices ex-showroom. Also, the company’s overall auto sales for December 2024 stood at 69,768 vehicles, a growth of 16%, including exports. Specifically, the tractor sales for December 2024 were up 10% YoY. In terms of retail sales, M&M is one of the highest tractor sellers with a market share of around 30%. 

Eicher Motors 

The other key tractor play that Jefferies is betting on is Eicher Motors. It has given a ‘Buy’ rating on the stock with a target price of Rs 6,600 per equity share, which is 20% higher than the earlier target of Rs 5,500. The Eicher Motors stock’s current market price is still almost 28% away from the target price. The stock has risen 5.8% in the last five trading days and 6.4% in the past one month. 

The company has clocked robust tractor sales in December, up over 23% YoY. Moreover, Eicher’s two-wheeler segment, Royal Enfield is gearing up to launch new motorcycles in the Indian market in 2025, with the 650 range set to expand even further. Recently, it was spotted testing Interceptor 750 on roads. 

TVS Motor

The third big bet in the automotive space is TVS Motor for Jefferies. It has given a target price of Rs 3,050. It said that the company has gained a share in both domestic as well as export of two-wheelers in recent years. Even the sales of TVS’ electric two-wheelers have picked up significantly in the past few months. The company will be releasing its quarterly earnings later in January. 

The stock of this two-wheeler major however hasn’t had a great run in the recent past. It has fallen 1.4% in the last five trading days and 4.6% in the last one month. The scrip has declined almost a per cent in the previous six months.

What triggered Jefferies’ big buy call?

Jefferies expects that the premium multiples will likely be sustained only by these three companies- M&M, Eiche Motors and TVS Motor Company. The brokerage sees better growth outlook prospects and strong or improving franchises. However, the brokerage firm did add a note of caution and highlighted that it did not consider the valuation of auto companies cheap.