Hero Moto Corp, Eicher, Maruti Suzuki: How to play Auto theme ahead of festive season? Axis Securities decodes

Auto stocks are back in focus ahead of the festive season. On a year-to-date basis, the Nifty Auto index is up over 28 per cent. Axis Securities interacted with the dealers across the country of Hero Moto Corp, TVS, Bajaj Auto, Eicher, Maruti Suzuki and Ashok Leyland and sees more optimism in the dealers of the passenger vehicle (PV) segment with robust demand for utility vehicles (UVs).

In the two-wheeler (2W) segment, dealers are witnessing good demand for the 125cc+ segment, while entry-level bikes continue to remain weak due to uneven and deficient monsoon in the key end markets.

Axis Securities said the outlook for commercial vehicles (CVs) is positive for the second half of FY24. In the PV segment, their interaction with Maruti’s dealers indicates more optimism ahead for the festive season. The overall dealer feedback is more upbeat with higher footfall and increased product inquiries. New launches under the Nexa brand (Jimny, Fronx and Grand Vitara) already have strong order books.

"In the 2W segment, TVS, Bajaj and Eicher’s feedback was more positive than Hero MotoCorp’s feedback, with higher demand for the 125cc segment as compared to the entry-level segment. Hero’s feedback from the ground was mixed with some dealers pointing towards flat to positive sales growth FYTD, while some dealers (especially in the Monsoon deficient region of Maharashtra and Bihar) pointed towards a drop in sales and a calm festive season ahead," it said.

Despite the seasonally weak monsoon period, Ashok Leyland's dealer feedback was positive on the MHCV sales outlook and the demand momentum is likely to increase in the second half of FY24. It will be led by increased government spending on road construction and infrastructure activities.

The brokerage remains selective and prefers Bajaj Auto, TVS Motors and Eicher in the 2W segment, Maruti in the PV segment, and Ashok Leyland in the CV space. In the Auto ancillary space CIE Automotive and Steel Strips Wheels are its top picks. Post the recent rally in stock prices, it recommends a 'Buy' on Dips strategy for all investors.

(Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.)

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