Maruti Suzuki, Ashok Leyland: What makes brokerages bullish on these auto stocks?

As auto companies came up with their monthly sales figure for June, brokerage firms have picked Maruti Suzuki and Ashok Leyland for good returns. They believe the launch of all new Maruti Brezza and growing demand of commercial vehicles will aid these auto stocks going forward.  

Meanwhile, Maruti Suzuki India Limited sold a total of 155,857 units in June 2022, said the company in a stock exchange filing on Friday. Total sales in the month include domestic sales of 125,710 units, sales to other OEM of 6,314 units and exports of 23,833 units, it said.  

"The shortage of electronic components had a minor impact on the production of vehicles, mainly in domestic models. The Company took all possible measures to minimise the impact," Maruti Suzuki said.  

Similarly, Ashok Leyland domestic sale stood at 13469 units in June 2022 against 5851 units last year in the same month.  

Likewise, domestic and exports numbers of the Indian auto manufacturer grew from 6448 in June '21 to 14531 in June 2022, the company said in its press release.  

Here is what brokerages say on these auto stocks  

Maruti Suzuki:  

Brokerage house Motilal Oswal maintained a buy on Maruti Suzuki with a target price of Rs 10,000. It believes a strong demand, improving semiconductor supplies, moderating commodity inflation and a favorable forex rate will aid a margin recovery of the India's largest car maker.  

"Brezza is the first of many new platforms and SUV launches planned over the next two years. Considering that the Brezza was the oldest model in the hyper-competitive UVC segment, this platform upgrade was timely. It will help MSIL recover part of its lost market share in this important SUV segment," said Motilal Oswal.  

Ashok Leyland:  

Ashika Stock Broking, which maintained a buy on the auto counter for target price of Rs 170, says that CV industry has a positive correlation with faster-than-expected recovery in economic activities after government announced several unlock measures 

Ashok Leyland Ltd believes that the M&HCV segment would lead the recovery in the coming months with demand getting support from core activities i.e., construction, mining and infrastructure. 

The stock is also likely to be helped by good farm sentiment on expected higher farm income led by normal monsoon and higher crop production. Besides, exports, which account for around 13% of revenue of Ashok Leyland, remain another focus area for the domestic auto manufacturer.  

Normalcy in economic activities is also expected to drive sales in bus segment in FY23, where Ashok Leyland is a market leader in M&HCV bus segment with a market share of 45%.