TVS Motors, Hero MotoCorp, CIE Automotive and Steel Strips Wheels: 4 Auto sector picks by Axis Securities

In its quarterly review on auto and auto ancillaries sector, Axis Securities said the Indian auto industry has reported a mixed set of results.

In Q3 auto sector companies witnessed revenue, Ebitda, and PAT growth on year-on-year (YoY) basis, although falling slightly short of expectations. But there was a decline quarter-on-quarter (QoQ), primarily due to sequential decreases in production volumes across segments.

However, encouraging two-wheeler demand driven by rural markets and a stable margin outlook augurs well for the short to medium-term performance of Auto stocks. Axis Securities has TVS Motor Company, Hero Motocorp Ltd, CIE Automotive Ltd, and Steel Strips Wheels Ltd as its preferred Auto picks.

TVS Motor Company: (target price Rs. 2,350)

Axis Securities said, In Q3FY24, TVS Motor Company deployed an additional Rs 300 Cr in investments for R&D expenditures, building a robust global engineering team, and making investments in subsidiaries such as Norton Motorcycles, SEMG, and Killwatt GmbH. The forthcoming portfolio resulting from these investments is expected to complement the existing TVS Motor product range, with multiple new launches anticipated in FY25 and beyond.

“On Two Wheelar-EV business: The management informed that the TVS iQube is currently available at 400 touchpoints as of Dec’23 and is expected to double over Q4FY24.

Additionally, export of the TVS iQube has commenced in Q3, and sufficient capacity is being built in the Chennai plant over the next few years to meet the demand for 2W EVs. The EV market share of TVS in Q3FY24 stands at ~20%, surpassing ICE market share levels (~18),” Axis said.