Auto sales expected to remain strong. Here are Emkay’s top picks

Auto stocks have been buzzing since the past few sessions as auto sales are expected to improve with ease in covid-induced lockdowns and pent-up demand across regions. Brokerage and research firm Emkay Global Financial Services expects the auto sales for the month of July 2021 to likely be strong.

The brokerage expects a sequential improvement in volumes across segments, barring Tractors, due to seasonal factors. Emkay Global has retained its positive view on the auto sector.

Its top picks include Tata Motors (Target price of 400), Ashok Leyland (TP: 155), Maruti Suzuki (TP: 9,000) and Eicher Motors (TP: 3,180). In Ancillaries, its preference is Motherson Sumi (TP: 325) and Apollo Tyres (TP: 290).

Industry volumes for 2-wheelers are likely to be better sequentially, Emkay said, but lower in comparison to 2019 levels, as demand is subdued for low-income categories. ”Although domestic volumes would be under pressure, exports are likely to witness positive growth due to healthy demand and stable currency rates in key markets.” It expects two-year CAGR for domestic volume to be -2% for Bajaj Auto, -3% for Hero Moto Corp Ltd, -9% for TVS Motors Ltd and -14% for Eicher Motor- Royal Enfield.

Emkay expects passenger vehicles industry volumes to improve on the back of a healthy order book and a pickup in enquiries/bookings in urban and rural areas. In addition, wage revisions for government employees have also likely aided demand.

For tractor, industry wholesales should be supported by a favourable base as dispatches were affected last year due to supply issues. Customer sentiments have been aided by near-normal monsoons and adequate reservoir levels, the note stated. Emkay Global expects domestic volume to grow by 51% YoY for Escorts and 27% YoY for M&M. Escorts’ growth is likely to be higher due to a relatively lower base.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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