Looking back at the third-quarter benefits of the auto sector, income development for businesses have been robust. Domestic brokerage and investigation firm Emkay Global in a current note stated their coverage universe, except Tata Motors, saw an 18% on-year income development. During the quarter, double-digit volume development was registered in tractors, PVs and two-wheelers. Although there could be close to term stress from rising commodity rates, cost hikes are believed to offset stress. Emkay Global believes that the Auto sector remains a important beneficiary of the post-Covid financial recovery and low-interest prices.
Stock picks
Eicher Motors
Target cost: Rs 3,300
Currently, the stock trades at Rs 2,503 per share following obtaining fallen 16% due to the fact February 8. In the third quarter, Eicher Motors reported an on-year development in income and net profit. EBITDA margin was slightly under the estimates of Emkay Global, on greater-than-anticipated raw material charges and employee costs. “We retained Buy with a target price of Rs 3,300, based on 25x/20x P/E for the motorcycle/ CV businesses on FY23 estimates,” the brokerage firm stated. This translates to a 31% upside from existing levels.
Atul Auto
Target cost: Rs 275
Atul Auto, a 3-wheeler manufacturer based out of Gujarat has one of the sharpest upside possible estimated by analysts at Emkay Global. The corporation is nevertheless to recover from the pandemic blow as on-year development numbers stay adverse. However, on-quarter basis, income os up 33%, and net profit soared to 60.6% in the October-December quarter. “Led by lower volume and margin assumptions, we reduce our FY22/23 EPS estimates by 26%/4%. We maintained Buy with a target price of Rs275, based on P/E of 10x on FY23E,” the report stated. The stock has to jump 51% from existing levels to attain the target cost.
Maruti Suzuki
Target cost: Rs 9,000
The biggest automobile manufacturer in India, Maruti Suzuki is also on Emkay’s purchasing cart. In the third quarter of the existing fiscal year, Maruti Suzuki reported a 13% on-year and 25% on-quarter development in revenues. Net profit soared 24% from the preceding year and 41.5% from the preceding quarter. Although EBITDA margins have been under the estimates of Emkay Global. EPS has been raised by 8-12% for the monetary year 2021 to 2023, owing to greater volume assumptions. The target cost of Rs 9,000 per share, implies an upside possible of 29% from existing levels.
(The stock suggestions in this story are by the respective investigation and brokerage firms. TheSpuzz Online does not bear any duty for their investment tips. Please seek advice from your investment advisor prior to investing.)