Auto stocks started bleeding during the trading session on Thursday following a muted performance of Bajaj Auto Ltd in the September 2024 quarter. The results were below the expectation of the street and the richly valued counter was marred by the traders during the session, with a domino effect on the entire auto pack.
The Nifty auto index cracked nearly 3 per cent on Thursday The auto pack has dwindled as much as 7 per cent from its 52-week high. The sharp selloff in the auto index weighed on the Nifty50 pack as well, which dropped more than 150 points on Thursday, to test lows at 24,819.85 during the session.
Shares of Bajaj Auto Ltd crashed 9.7 per cent to Rs 10,482.65 on Thursday as it reported a muted Q2 performance. The two-wheeler major reported a 9 per cent rise in standalone net profit of Rs 2,005 crore, while revenue from operations grew 22 per cent at Rs 13,127 crore. Ebitda rose 24 per cent YoY to Rs 2,652.2 crore, while margins expanded 40 basis points to 20.2 per cent.
Overseas brokerage firms have a mixed views on Bajaj Auto stock. Nomura has maintained its 'buy' rating on the company with an increased target price of Rs 13,400, while Macquarie remains 'neutral' on the company with a target price of Rs 11,072. However, Citi has a 'sell' rating on the auto player with a target price of Rs 7,800.
Among other accidents in two-wheeler space, TVS Motor Company tanked 6.25 per cent to Rs 2,601 on Thursday, while Hero MotoCorp tumbled more than 5 per cent to Rs 5,125.55 during the session. Royal Enfield maker Eicher Motor shed 3.36 per cent to Rs 4,521 for the day.
InCred Equities has a 'reduce' rating on Eicher Motors with a target price of Rs 4,086 on the stock. Eicher Motors’ volume growth is disappointing and may not support its rich Ebitda margin, said InCred, adding that stretched valuation of the auto player is also a cause of concern.
PL Capital estimates Hero Moto's revenue to grow by 9.4 per cent YoY due to 7.3 per cent YoY growth in its volume. Its product mix has remained relatively stable while input costs have also remained stable, however, its investment towards EV business could offset the operating leverage. PL has an accumulate rating on Hero MotoCorp Ltd with a target price of Rs 5,906.
The carnage was not limited to two-wheeler players only. Among the car makers, Mahindra & Mahindra (M&M) dropped 3 per cent to Rs 2,980.05, while the largest car maker of India, Maruti Suzuki dropped 2.5 per cent in the early session to Rs 12,072.55 in the early session. Tata Motors and Ashok Leyland were down a per cent each.
In an interaction with Business Today, Aditya Agrawal from Sanctum Wealth suggested that M&M should be a buy on dip player, while he advised investors to be cautious on 'richly valued' two-wheeler stocks.
Recently, Tata Motors Ltd reported a 10 per cent YoY decline in JLR volumes in Q2FY25 due to production constraints. JLR has already guided for a production constraint in Q2FY2025 in advance and further guided for a strong recovery in production in H2FY2025. BMW has cut down EBIT margin guidance for CY2024, largely due to company-specific issues, said Sharekhan.
"Given JLR’s production constraint issue has already been guided and BMW’s guidance for EBIT margin cut in FY25 was more of a company-specific issue, we maintain our BUY view on Tata Motors Limited (TML) with an unchanged PT of Rs 1,319 based on expectations of continued improvement in JLR, PV, and CV businesses as well as reduced net automotive debt," it said.
Maruti Suzuki's bearish price action may find strong support at the 200-day SMA, potentially signaling a reversal in the stock’s direction, said Laxmikant Shukla, Technical Research Analyst at YES Securities. "This presents an opportunity for accumulation with an attractive risk-reward profile" he said with a 'buy' call with a target price of Rs 12,000–12,100 and a stop loss at Rs 11,560.