Broking firm Motilal Oswal has suggested buying the stocks of Maruti Suzuki, Eicher Motors and Tata Motors with significantly high targets. Here are some of the reasons it is positive on these stocks.
Maruti Suzuki
The company’s Dec’22 wholesales were in line with MOSL’s own estimates of 139.35k units, which was a decline of 9% y-o-y. Domestic volumes declined 10% y-o-y to 117.55k units. The compact segment volumes declined 19.5% y-o-y to 57.6k units (est. 69k units). Mini segment volumes declined 40% y-o-y to 9.8k units (est. 15k units). UV segment volumes grew 25% y-o-y to 37k units (est. 33k units). “We estimate FY23 estimate volumes to grow by 21% y-o-y, implying a residual growth of 13%, or run-rate of 184.7k units. The stock trades at 35.5x/22.2x FY23E/FY24E earnings. We maintain our BUY rating with a TP of `11,250 the brokerage has said.
Eicher Motors
On Eicher Motors stock, MOSL has a buy rating with a PT of ` 4,150 (up 29%). Royal Enfield’s (RE) dispatches declined by 7% y-o-y to 68.4k units (est. 69K units). Exports which were muted for the last two months improved 71% m-o-m to 8.6k units; flat y-o-y. We estimate RE volumes to grow 44% in FY23E, implying a residual growth of 34%. There is downside risk to our estimate though. VECV wholesales were above our estimate. Volumes grew 17% y-o-y to 7.2k units (est. 5.4k units). For VECV, we estimate 35% growth in volumes for FY23, implying a monthly runrate of 8k units.
Tata Motors
On Tata Motors stock, MOSL has a buy call with a TP of `500 per share. According to MOSL, commercial vehicle volumes were above its estimates flat y-o-y to 33.95k units (est. 30.5k units). M&HCV volumes grew 20% y-o-y to 15.8k (above our estimate of 13.4k). LCV volumes declined 13% y-o-y to 18.2k units (above our estimate of 17.1k). PV volumes (below est.) grew 14% y-o-y to 40.4k units (v/s est. 45.2k units). Overall, we estimate a 32% growth in total volumes for FY23e, implying a 7% residual growth.
We are estimating 26% growth in M&HCV volumes for FY23, implying a 9% residual growth, or a monthly a run-rate of 19.8k units. For LCVs, we estimate 20% volume growth in FY23, implying a residual growth of 23%, or a run-rate of 25.6k units. For PVs, we are estimating 42% growth in FY23, implying a residual decline of 1.5%.
MOSL has given a Neutral rating to Escorts Kubota, a MidCap company operating in auto sector. The company posted a 19% y-o-y growth in Tractor dispatches to 5.6k units in Dec’22 (est. 5.8k units). It reported a 22% y-o-y growth in domestic tractor sales to ~5k units (est. 5.2k). However, it clocked a 3% y-o-y decline in Tractor exports to 594 units. Sales of Construction Equipment grew 12% y-o-y to 423 units. It says Tractor volumes to grow ~9% in FY23, implying a monthly run-rate of ~8.1k units. We are estimating a 5% growth in Construction Equipment for FY23, implying a monthly run-rate of 451 units, or a 5% residual growth.