As demand is back to pre-COVID levels across sectors, including two-wheelers, passenger cars and logistic segment, HDFC Securities believe that retail trends in festive season will drive returns in the related stocks. The Nifty Auto index has jumped 20 per cent over the quarter as compared to a 9 per cent gain in the broader Nifty 50 index. Further, the recovery in the sales has been led by the opening of various regions (unlock 5.0), sustained rural demand and inventory build-up ahead of the festive season. “Valuation multiple for auto companies continue to re-rate and are now trading at levels between mean P/E and +1 standard deviation,” analysts at HDFC Securities said.
The research and brokerage firm believes that stock price returns will be driven by retail trends in the festive season, sustained recovery in volumes for rural segments, increased preference for personal mobility, structural reform announcements by the government for the Agri segment, and expectations of supportive government policy. Given the ongoing demand recovery, market leadership position and broad-based presence, HDFC Securities has a ‘buy’ rating on 5 autos and logistic stocks.
Hero Motocorp: The two-wheeler volumes are up 7 per cent on-year. The brokerage firm expects the margin at 12.8 per cent, PAT to come in flat at Rs 920 crore on-year basis. The key monitorable are market share trends in the premium segment post the launch of Xtreme 160cc. Also, festive season expectations and current inventory levels will also be watched. It will take Hero MotoCorp to jump 15.5 per cent to reach the target price of Rs 3,800.
Maruti Suzuki: HDFC Securities has recommended to buy Maruti Suzuki shares and sees 16 per cent potential upside. The brokerage firm expects revenues to grow by 16 per cent on-year owing led by similar growth in volumes and PAT to grow by 11 per cent on-year to Rs 1,500 crore. key things to be watched out are demands trends particularly that of entry-level cars and new product introduction timelines.
Endurance Technologies: The stock is trading nearly 2 per cent up at Rs 1,093 apiece on BSE. Endurance Technologies will have to jump 15.5 per cent from the previous close to touch the price target of Rs 1,260. The brokerage firm maintains a good outlook for the second quarter of the current fiscal. It expects PAT at Rs 170 crore to grow by 3 per cent on a year-on-year basis. Status of integrating the overseas technology (braking systems) and outlook on industry growth trends will be watched.
Gulf Oil Lubricants India: HDFC Securities maintained a ‘buy’ rating with a target price of Rs 790, implying an upside of 24 per cent from the previous close. The key monitorable in the Q2 results will be volume outlook in the deodorant segment and raw material price trends as oil prices remain benign.
Gateway Distriparks: Gateway Distriparks will require to surge nearly 30 per cent to hit the target price of Rs 125 pegged by the HDFC Securities. The brokerage firm holds a weak outlook for the second-quarter earnings for the transportation-logistic company. The brokerage firm sees post fundraising, timelines for merging of subsidiaries, and update on Snowman Logistics stake sale now that the deal with Adani has been called off as key monitorable.
(The stock recommendations in this story are by the respective research and brokerage firm. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)