Four automobile stocks to buy this festive season

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Updated: October 4, 2017 11:04:03 AM

After Navratri brought a huge turnaround to retail sales, car makers have begun to dispatch large volumes to the dealers, in expectation of bumper Diwali sales. We take a look at four automobile stocks to buy this Diwali.

auto sales, auto sales in september, auto sector growth in september, september auto sectorAnalysts observed that the early festive demand has been good, delivering double-digit retail growth for most manufacturers. For their part, companies are pushing retail sales. (Image: Reuters)

Majority of Automobile players posted a rise in the monthly vehicle sales in September, buoyed by the festive season. Auto companies posted a robust double-digit sales growth for the month in the domestic market. After Navratri brought a huge turnaround to retail sales, car makers have begun to dispatch large volumes to the dealers, in expectation of bumper Diwali sales. We take a look at Angel Broking top picks from the space-

Ashok Leyland

Ashok Leyland reported a 27.53% jump in total sales at 15,370 units in September. According to Angel Broking, Ashok Leyland September-17 volumes were better than expected. The research firm notes that the MHCV volumes have been growing by 30% for the last two months, indicating a robust demand for the BSIV compliant vehicles based on the new technology, iEGR. Further, Ashok Leyland’s LCV volumes have grown by 14-15% whereas cumulatively between May-2017 to July-2017, company reported 26% yoy growth indicating that LCV growth is slower in the past two months (August to Sept 2017). Angel Broking remains bullish on Ashok Leyland with a target price of Rs 134. The shares were trading at Rs 122, down by more than 0.35%.

Maruti Suzuki

India’s largest car maker Maruti Suzuki India reported a 9.3% increase in total sales at 1,63,071 units in September. The numbers were below the research firm’s expectations. “Total volume growth was at 9.3% to 163,071 units, this was 3% below our expectations. While mini segment volumes declined yoy, compact segment volumes have shown a 45% yoy growth. Overall passenger cars grew by 11% yoy. UV volumes growth has slowed down to 8% yoy compared to double digit growth reported in earlier several months,” the firm noted. Angel Broking attributed the decline in sales to  slower economic activity, post GST as well as the cess hike taken earlier in September 2017. However, Angel Broking says that the growth is likely to pick up in October, given the onset of Diwali. The stock was trading at Rs 7,913, up by more than 0.3%. Angel Broking has a target of Rs 8,666 on the stock.

Bajaj Auto

Bajaj Auto reported 14% increase in total sales at 4,28,752 units in September. “Bajaj Auto ‘s September-2017 numbers have been better than expectations. Total volumes (2W + 3W) grew by 13.8% vs our expectation of 10%. Domestic motorcycle volumes grew by 7.3% yoy, this is highest growth in the last 12 months,” Angel Broking noted, adding, “ Total 3W volumes grew by 32% yoy which is highest growth in the last 18 months.” The firm has a buy rating on the stock with a target of Rs 3,350. The shares were trading at Rs 3,183, up by more than 0.6% since the previous close.

Hero Motocorp

India’s largest two-wheeler maker posted record sales of  7,20,739 vehicles. However, the company missed the estimates of the research firm in September-2017. “The numbers were slightly below our expectations, especially considering the ongoing festive season,” Angel Broking noted. Due to strong demand for 2 wheelers in the ongoing festive season, Angel Broking maintains a buy on the shares with a target of Rs 4,226. The shares were trading at Rs 3,827.75 this morning, up by more than 0.5% since the previous close.

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