09 Mar , 2022 By : Kanchan Joshi
Nifty Auto index has declined about 17% in the last one month as compared to over 6 percent fall for the Nifty, on the back of a re-emergence of risks such as a surge in commodity prices, higher oil prices and concerns on continued supply chain disruptions.
Sharing its top stock picks in the auto sector, JPMorgan said it has upgraded Ashok Leyland to Overweight from Neutral with target price of Rs135 as it remains bullish on the CV cycle recovery and the company has started to regain some of its lost market-share.
Analysts at JPM have revised Maruti's rating to Neutral from Underweight with price target of Rs6,525, due to a combination of recent stock price correction (around 24% in 1 month) and a potential for mix shift in favour of cars in a high fuel price environment.
Further, the global brokerage's preferred picks are Mahindra & Mahindra (M&M) with a target price of Rs965, Ashok Leyland and Bajaj Auto (target price: Rs3,800). It also has overweight tag on Hero MotoCorp (TP: Rs2,640) and TVS Motor (TP: Rs620).
JPM likes M&M as on believing auto business recovery (SUV LCV) should offset the weakness in tractors, and prefers Bajaj within 2Ws as its diversified revenue base should protect it from a domestic slowdown and make it a beneficiary of rupee depreciation.
“We continue to be Overweight on Tata Motors (TTMT) with target price of Rs515, as the company is taking measures to reduce its leverage. However, supply chain disruptions can lead to a delay in FCF generation at JLR (similar to 1HFY22). MSIL and M&M have just started to recover from chip shortages," the note stated.
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