Auto sector stocks have been under pressure since February this year, receding after having gained significantly in 2020.
Auto sector stocks have been under pressure since February this year, receding after having gained significantly in 2020. Although the second wave of covid-19 continues to remain an overhang on the sector, most stocks have held key supports, according to ICICI Direct. Going ahead, the brokerage expects the automobiles space to resume its uptrend, it said in a recent note. “The Auto Index has also generated a breakout above a falling channel containing last three month’s corrective decline indicating resumption of up move,” the report said. Demand for personal vehicles and commercial vehicles are expected to rise in the coming years.
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Target – Rs 138
On the technical side, the stock has gone through a healthy retracement over the last three months. “The stock is seen resuming its primary up trend as it has registered a breakout above its falling channel containing its entire last three months corrective decline signalling resilience and offers fresh entry opportunity,” the report said. Ashok Leyland has now given a breakout above its last five week’s range of Rs 106-119, which ICICI Direct believes indicates the conclusion of the corrective phase. Support for the stock lies at Rs 111, which would act as a stop-loss.
Ashok Leyland is a purely commercial vehicle play, commanding a 16.3% market share. “Ashok Leyland is a prime candidate for the upcoming CV cycle upswing,” ICICI Direct said. “We build ~35% volume CAGR, 38.5% revenue CAGR for ALL over FY21E-23E along with return to profitability by that time,” they added. The stock is trading at Rs 125 per share, implying an upside of 10%. ICICI Direct recommends buying the range of Rs 118-122 for a three-month time frame.
Target – Rs 635
The stock has remained an outperformer in the auto space. “Key highlight during the entire rally since March 2020 low of Rs 199, is that each correction has held rising 10-week EMA. During the past three month’s corrective phase, the share price maintained its rhythm and formed a higher base at key average that coincides with multi-year breakout area around Rs 460,” ICICI Direct said. Immediate support for the stock is at Rs 500.
Minda Industries is a leading auto ancillary with a diversified presence across segments, products and clients. ICICI Direct believes that the pickup in OEM production in recent months post waning of covid first wave effects bodes well for Minda Industries given its large dependence on the channel. “Minda offers a prominent play on vehicular premiumization in India and is seen continuing to outperform industry via kit value increase and new product additions,” they added. The stock trades at Rs 571 per share, indicating an upside of 13%. Buying has been advised between Rs 535-552, with a stop-loss at Rs 495.