HSBC on Wednesday upgraded TVS Motor Company Ltd stock to 'Buy' from 'Hold' and downgraded Ola Electric Mobility Ltd to 'Hold' from Buy. It retained its 'Buy' rating on Bajaj Auto Ltd. The foreign brokerage said valuations look relatively undemanding now post the recent correction in two-wheeler. It sees limited earnings downside post EPS revisions in the December quarter.
"2W growth has moderated in the recent months, though we still expect the industry to grow in high-single digits in FY26. The past 10-year CAGR for the industry is still less than 3 per cent and lower than most other auto segments. Electrification has been rather slow despite significant incentives by the government. Positively, rural is recovering and so is the export market," HSBC said.
TVS Motor share price target at Rs 2,800 HSBC said TVS Motor's risk-reward looks favourable now. It said TVS Motor arguably has the most established R&D capacity amongst the two-wheeler OEMs. The company has been able to maintain share in the domestic market and has gained decent traction in EVs as well, it said.
"We see this as a positive back-drop for TVS in the medium term. Finally, TVS continues to gain traction in export markets as well. The stock has corrected by 25 per cent from the top and is now valued at 34x FY26e EPS. Admittedly, losses in subsidiaries like Norton remain a worry for us, but standalone margins have high visibility, thanks to PLI accruals from 4Q as well," HSBC said.
At the industry level ICE scooter share is stable at 31 per cent since FY21, while EV scooters have taken market share mostly from economy MCs (75-110cc), especially urban economy MC sales. This reduces the ICE scooter cannibalisation risks for TVS Motor, HSBC said while suggesting a target price of Rs 2,800 on the stock.
Ola Electric share price target at Rs 70 HSBC said since its IPO, Ola Electric has consistently disappointed on volumes, largely led by quality and service issues. While the company has addressed the service issues and Ola Electric is schedule to launch an EV motorcycle soon, competition catch-up has also been aggressive.
"OLA's market share is down to 23 per cent from Q1FY25's peak of 49 per cent. With waning confidence in medium- to long-term estimates, we downgrade the stock to Hold from Buy. We cut our estimates; our target price is now Rs 70 from Rs 100 earlier.
Bajaj Auto share price target at Rs 1,050 HSBC has retained its 'Buy' rating on Bajaj Auto, given a diversified earnings profile and reasonable valuations post the recent stock correction.
"However, we lower our target price to Rs 10,500 from Rs 11,500 as we lower the long-term growth rate. Export volumes are gradually improving as well. The impending launch of e-Rickshaw is an upside catalyst. The company lost market share in MCs in the recent months (2024) on launches from competition in the 125cc category in particular. We expect Bajaj's MC market share to stabilise in 2025. Further loss of market share is a downside risk," HSBC said.