Two-wheeler stocks fall up to 3% amid valuation concerns; Hero MotoCorp gains

Two-wheeler stocks traded in the red on Wednesday, January 17, as global brokerage CLSA turned cautious on the pack amid rich valuations, except for Hero MotoCorp. Two-wheelers, including the likes of Bajaj Auto, Eicher Motors, and TVS Motor, slumped up to 3 per cent in early trade, while Hero MotoCorp gained nearly 1 per cent at the day’s high.

CLSA is of the view that the valuations of the companies in the segment are pricing in double-digit volume growth over the next few years, which they deem unlikely. The brokerage considers the stocks overvalued (ex Hero MotoCorp) following the recent rally.

Further, the brokerage maintained that margins for electric two-wheelers are likely to remain challenging in the near term as all OEMs have plans to launch more affordable electric scooters. “Since industry volumes are still below the previous peak, industry volume growth is likely to be supported by replacement demand and faster growth in the premium segment,” noted CLSA.

Outlook on different stocks from the pack

Bajaj Auto:

The stock has been downgraded by CLSA to ‘Sell’ from the earlier call of ‘Reduce’ with a reduced target price of Rs 6,315 as against the earlier Rs 6,382 per share. The brokerage has slashed its FY24/25CL volume assumptions by 4.7 per cent and 6.3 per cent, respectively. Additionally, the stock is believed to be expensive, hence the downgrade.

Hero MotoCorp:

The brokerage maintained an ‘outperform’ call on the stock with a raised target of Rs 4,964 as against Rs 4,127 per share. The brokerage estimates an increase in volume for the company in the premium motorcycle and electric scooter segments.

Eicher Motors:

The stock has been downgraded to ‘Sell’ from ‘Reduce’ rating with a reduced target of Rs 3,716 versus Rs 4,129. The company expects new competitors (Harley and Triumph) to gain market share from Royal Enfield.

TVS Motor:

The brokerage has maintained its ‘Sell’ rating on the counter but has raised the target price to Rs 1,438 versus Rs 1,378. The brokerage has decreased its FY24/25CL volume estimates by 2.0/4.1% and rolled forward to March 2026.