Most of the original equipment manufacturers or OEMs reported year-on-year growth in sales in June 2016, albeit at a lower-than-expected pace, with medium and heavy commercial vehicles or MHCV sales slowing down and tractors posting strong double-digit YoY growth. Car sales of most OEMs were better on the back of recent new launches, while two-wheelers displayed a mixed performance.
Companies like Maruti Suzuki India or MSIL, Hero MotoCorp and Ashok Leyland, who missed expectations, disappointed the most, according to Nirmal Bang Insitutional Equities. On the positive side, TVS Motor Company’s overall sales and Mahindra & Mahindra or M&M’s tractor sales were better than expectations, the brokerage house said a in a report.
June is a seasonally strong month for tractor sales and M&M as well as Escorts posted double-digit sales growth.
Below are 5 stocks from the automobile sector on which Motilal Oswal is looking bullish post their June sales figures.
Maruti Suzuki: Hit by a fire incident at one of its key vendors, Maruti Suzuki India (MSI) on Friday reported 13.9 per cent drop in total sales in June at 98,840 units as against 1,14,756 in June 2015. Maruti Suzuki plans to recover the production loss during the course of the year. Besides it is gradually stepping up production of newly launched models Baleno and Brezza to service the pending demand. The stock trades at 20.3x/16.6x FY17E/18E consolidated EPS of Rs 205/251. Motilal Oswal has maintained ‘Buy’ on Maruti Suzuki with target price of Rs 4,525.
Tata Motors: Tata Motors reported 8 per cent growth in sales at 44,276 units in June. The company had sold 40,869 in the same month last year. According to Motilal Oswal, the stock trades at 10.8x/8.6x FY17E/18E consolidated EPS respectively. The brokerage house maintain ‘Buy’ on Tata Motors with target price of Rs 556.
Ashok Leyland: Ashok Leyland on July 1 posted a 7 per cent rise in total sales at 11,108 units in June 2016. It had sold 10,429 units in June last year. According to Motilal Oswal, the stock trades at 14.8x/11.6x FY17E/FY18E EPS and at around 8.7/7.1x EV/EBITDA. It has ‘Buy’ on Ashok Leyland with target price of Rs 124.
Eicher Motors: Royal Enfield reported 36 per cent increase in total motorcycle sales at 50,682 units in June. It had sold 37,341 units in the same month last year. Motilal Oswal is bullish on Eicher Motors shares with target price of Rs 22,627.
Hero MotoCorp: Hero MotoCorp on July 1 reported 1.32 per cent increase in sales at 5,49,533 units in June. It had sold 5,42,362 units in June 2015. According to Motilal Oswal, shars of Hero MotoCorp trades at 17.7/14.5x FY17E/18E EPS. It has ‘Buy’ on Hero MotoCorp shares with target price of Rs 3,634.
(With agency inputs)