Eicher Motors, Maruti Suzuki, Ashok Leyland jump on robust September sales data

The overall automobile sector reported the best-ever sales figures in September both month-on-month as well as year-on-year. Amid this, the auto companies’ shares started trading higher in the early morning. However, stocks succumbed to market pressure as the day progressed.

Easing semiconductor supplies boost PV (passenger vehicle) retails and CVs (consumer vehicles) continue to grow on increasing economic activities and high-capacity utilization, Motilal Oswal said in its auto sector review.

It added that the 2W (two-wheeler) segment demand hinges on the festive season, which seems to have received an encouraging start.

The domestic brokerage prefers 4Ws over 2Ws, on the back of strong demand and offers a stable competitive environment, and expects the CV cycle to maintain its momentum. The companies with higher visibility in terms of demand recovery, a strong competitive positioning, margin drivers, and balance sheet strength are most preferred by Motilal Oswal.

 Among all, Eicher Motors shares gained most by around 3.5 per cent, followed by Ashok Leyland, up nearly 3 per cent and Maruti Suzuki up over 1.5 per cent. M&M, TVS Motors, Bajaj Auto, Hero Moto and Tata Motors were up between 0.5-1 per cent on the BSE intraday today.

Most of these auto heavyweights were trading in the red intraday amid weak market sentiment dragging the Nifty Auto index by over 1 per cent, as compared to a 0.6 per cent fall in the Nifty50 index on Monday at around 01:50 PM.

“In the PV segment, wholesales in near term are likely to be a function of further normalisation of supplies and response to recent model launches. 2W demand remains contingent on rural sentiments and festive-related demand. Steady freight rates have supported the profitability of CV operators. Rising interest rates, however, remain a key deterrent,” JM Financial said.

Motilal Oswal said Maruti, and Ashok Leyland are our top OEM (Original Equipment Manufacturers) picks. Among auto component stocks, the brokerage prefers Bharat Forge and Apollo Tyres and it also likes Hero Moto as a pure play on the expectations of domestic demand recovery.