Looking at the third quarter results of the automotive sector, the growth in corporate revenues has been strong. In a recent memo, national brokerage and research firm Emkay Global said its hedging universe, with the exception of Tata Motors, saw revenue growth of 18% year-over-year. Double digit volume growth was recorded in tractors, PVs and two-wheelers during the quarter. While higher commodity prices may come under short-term pressure, price increases should offset the pressure. Emkay Global believes that the automotive sector remains one of the main beneficiaries of the post-Covid economic recovery and low interest rates.
Choice of actions
Price target: Rs 3,300
Currently, the stock is trading at Rs 2,503 per share after falling 16% since February 8. In the third quarter, Eicher Motors reported year-over-year growth in sales and net income. The EBITDA margin was slightly lower than Emkay Global’s estimate, due to higher than expected raw material and personnel costs. “We have selected Buy with a target price of Rs 3,300, based on a P / E of 25x / 20x for motorcycle / CV activities on estimates of FY23,” the brokerage firm said. This translates into a 31% increase from current levels.
Course target: Rs 275
Atul Auto, a Gujarat-based three-wheeler manufacturer, has one of the highest upside potentials estimated by Emkay Global analysts. The company has yet to recover from the pandemic as the one-year growth figures remain negative. However, on a quarterly basis, revenues increased 33% and net profit climbed to 60.6% in the October to December quarter. “With lower volume and margin assumptions, we are reducing our EPS estimate for fiscal 22/23 by 26% / 4%. We have maintained Buy with a target price of Rs275, based on a 10x P / E on FY23E, ”the report says. The stock must jump 51% from current levels to hit the target price.
Course target: Rs 9,000
India’s largest automaker, Maruti Suzuki is also on Emkay’s shopping cart. In the third quarter of the current fiscal year, Maruti Suzuki recorded growth of 13% year-on-year and 25% quarter-on-quarter. Net profit increased 24% from the previous year and 41.5% from the previous quarter. Although EBITDA margins were lower than Emkay Global estimates. EPS was increased by 8-12% for fiscal year 2021-2023, due to higher volume assumptions. The target price of Rs 9,000 per share, implies a potential increase of 29% from current levels.
(The stock market recommendations in this article are issued by the respective research and brokerage firms. The Bharat Express News Online assumes no responsibility for their investment advice. Please consult your investment advisor before investing.)