JBM Auto, Olectra Greentech, Tata Motors in focus as Cabinet approves e-Bus Sewa scheme; check top picks

e-Bus Sewa scheme approved: Shares of electric bus manufacturers were in focus on Thursday (August 17), a day after the Union Cabinet cleared the PM e-Bus Sewa scheme, under which 10,000 new electric buses will be provided to 100 cities across the country at a cost of Rs 57,613 crore. The objective of this scheme is to improve mobility in tier II and tier III cities. 

At the time of filing this news, JBM Auto was trading nearly 2 per cent higher at Rs 1,469.75 on the BSE while Olectra Greentech was up over 2.57 per cent at Rs 1,255.10. Ashok Leyland was trading over 0.60 per cent higher at Rs 189.70. Tata Motors, on the other hand, was flat with a negative bias at Rs 618.05 on the BSE while Eicher Motors was trading over 0.60 per cent lower at Rs 3,305.25 on the BSE. 

JBM Auto finally ended at Rs 1,438.45, down 0.45 per cent while Olectra Greentech ended half a per cent higher at Rs 1,229.80. Eicher Motors settled at Rs 3,296.35, down 0.88 per cent and Tata Motors slipped 0.85 per cent to close at Rs 613.55. Ashok Leyland ended 0.24 per cent higher at Rs 188.95 on the BSE.

Speaking to the media, Information and Broadcasting Minister Anurag Thakur on Wednesday said that of 169 cities, 100 cities will be shortlisted, and 10,000 electric buses will be provided to them.

The amount of Rs 57,613 crore will be provided till 2037, of which Rs 20,000 will be provided by the Centre while the remaining amount will have to be generated by states, Thakur said. CLICK HERE TO READ FULL REPORT 

Goldman Sachs notes that the related companies' already strong order books will only get stronger after the Union Cabinet's nod to the scheme. The brokerage is bullish on Tata Motors and Ashok Leyland and has assigned buy calls for both stocks. Tata Motors' target price is set at Rs 710, while Ashok Leyland's target price is Rs 230.

JM Financial, in its Q1 results review note on Ashok Leyland issued on July 24, said that softening commodity costs, higher operating leverage, and cost control initiatives are expected to support profitability. CV upcycling is expected to continue in FY24, given expanding economy. It estimates a revenue compound annual growth rate (CAGR) of 11 per cent and strong growth in profitability during FY23–25E. 

"We maintain BUY with a Mar’24 TP of Rs 200 (20x fwd. earnings). A slowdown in the economy and an increase in competitive intensity are the key risks," the brokerage added.

As regards Tata Motors, analysts at Prabhudas Lilladher, in its Q1 results review note, said they maintain their positive stance on the stock due to the following reasons:

• JLR’s volume ramp-up is resulting in strong revenue, profitability, and FCF
• CV segment (on the domestic side) benefiting from ongoing upcycle, operating leverage, and tailwinds from low commodity costs and low discounting; and
• Sustained market share in the PV segment (13.5% vs. 8% in FY21), led by a revamped portfolio, rising SUV share, and rising EV penetration.

"We expect a revenue/EBITDA CAGR of 17 per cent /44 per cent over FY24/25E. Retain ‘BUY’ with a SoTP-based TP of Rs 760 (earlier Rs 675)," the brokerage said in a report issued on July 26.