Automobiles Sector: The stocks which can fetch a return ranging from 3% to 37%

Motilal Oswal Securities | Oct. 12, 2017, 4:20 p.m.


Volume recovery across segments; first quarter post regulatory hiccups

Regulatory actions (demonetization, emission norm changes and pre-GST destocking) had materially influenced auto volumes since 3QFY17. However, given the  waning regulatory impact, the automobile sector has witnessed gradual volume growth August onward. This was partly led by pre-festive inventory filling and  positive rural sentiment in key markets. Our channel checks suggest above-average  volume growth in key rural markets during this festive season.

Amara Raja Batteries

We are reducing EPS estimates of FY18E/FY19E by 9.4%/13.2% as  we factor in lead price inflation. The stock trades at 27.7x FY18E  and 21.5x FY19E EPS; Maintain Buy.

Ashok Leyland

We revise EPS estimates of FY18E/FY19E by 3%/0.8% led by better operating performance. The stock trades at EV/EBITDA of 12.7x  FY18E and 9.8x FY19E EBITDA. Maintain Buy.

Bajaj Auto

The stock trades at 21.7x FY18E and 18x FY19E EPS; maintain Buy.

Bharat Forge

The stock trades at 34.6x FY18E and 24.8x FY19E EPS; maintain


The stock trades at 38.4x FY18E and 29.7x FY19E EPS; maintain Neutral.


We expect adjusted PAT to decline 14% YoY to INR921m. Buy.

Eicher Motors

The stock trades at 37.2x FY18E and 27.5x FY19E EPS. Maintain Buy.

Endurance Technologies

The stock trades at 35.6x FY18E EPS and 26.9x FY19 EPS. Maintain Buy.


PAT should increase 91% to INR657m, as against INR343m in  2QFY17. Neutral.

Exide Industries

The stock trades at 22.8x FY18E and 15.4x FY19E EPS, and maintain Buy.

Hero MotoCorp

We have cut our FY18E/FY19E EPS estimates by 2.3%/1%. The stock trades at 20.3 FY18E and 19.1 FY19E EPS; maintain Neutral.

Mahindra & Mahindra

The stock trades at 19.9x FY18E and 16.9x FY19E EPS; Maintain Buy.

Maruti Suzuki

The stock trades at 27.5x FY18E and 20.5x FY19E EPS. Maintain Buy.

Tata Motors

The stock trades at 21.1x FY18E and 6.9x FY19E EPS. Buy.

TVS Motor Company

The stock trades at 43.4x FY18E and 26.7x FY19E EPS; Maintain Buy.


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