It has been a rough fiscal fourth quarter for Maruti Suzuki, Tata Motors, and Eicher Motors stocks despite a robust financial performance, as analysts turned bearish on several auto firms, making them the most downgraded stocks over the last three months.

Maruti Suzuki stock saw a decrease in positive analyst recommendations, dropping to 33 'buy' calls at the end of May from 38 at February-end. 'Hold' calls increased to ten from six, while 'sell' calls remained unchanged at three.

Tata Motors, last year’s top-performing stock, also saw a decline in positive recommendations, with 'buy' calls falling to 20 from 26 in Q3, 'hold' calls rising to eight from five, and 'sell' calls increasing to five. Eicher Motors faced a similar shift in sentiment, with 'buy' recommendations decreasing to 16 from 18 in Q3, 'hold' calls rising to 11, and 'sell' calls climbing to 14.

But what's behind this bearish sentiment even after a stellar net profit growth? Tata Motors reported a staggering 222 percent rise in net profit in Q4; Maruti and Eicher's net profit rose 48 percent and 18 percent, respectively.

Speed breakers ahead for Maruti

The country's largest four-wheeler manufacturer Maruti Suzuki, following its Q4 results, has seen a bunch of brokerages downgrading the counter.

Kotak Institutional Equities has a 'sell' rating on Maruti Suzuki with a target price of Rs 10,500, a 16% downside. They predict muted volume growth in FY25 and a decline in the small and SUV segments, with market share slipping to 40.5-41% due to new competitor launches.

The Wagon R maker registered a revenue of Rs 38,235 crore in the three months ended March 31.

Nomura is 'neutral' on the stock with a target of Rs 12,523, which is already breached. They warn market share may decline in FY 2025-26 and predict rising discounts due to increasing inventory.

Axis Securities downgraded Maruti stock to 'hold' from 'buy' due to expensive valuations and expected tapering of volume growth in the entry-level car segment. Competition in the SUV segment is also anticipated to escalate, with Maruti facing rivals like Mahindra, Tata Motors, Hyundai, and KIA.

No steam left in Tata Motors' engine?

The Tata Motors stock had a stellar 2023 by not just becoming the best performer on the Nifty but also more than doubling the share price. For FY24, the Nexon-maker's net profit reached Rs 37,764 crore, a significant surge from Rs 479 crore reported during FY23. But that hasn't convinced analysts.

Motilal Oswal maintains a neutral stance on the company, citing concerns over JLR's margin-dilutive EV ramp-up and moderating demand in India's CV and PV segments. Despite robust FY24 performance, potential headwinds could impact future results.

JLR has been testing the upcoming electric Range Rover in extreme conditions in the Arctic Circle and Middle Eastern deserts and plans to launch the electric version later this year.

Morgan Stanley also downgraded the stock from 'overweight' to 'equal weight', suggesting that the 'banner year limits incremental upside'. Sharp EV pickup-led turnaround in FY25 would be a key upside risk to track, it further added.

Nomura has also downgraded the stock to 'neutral' from 'buy' as it predicts that JLR can potentially face a demand risk. However, PVs are expected to grow ahead of the industry, and CV growth can moderate," the international brokerage said in a report.

What's troubling Eicher?

Time and again, Eicher's market share in the premium segment is a highly contested debate owing to stiff competition posed by the likes of Hero MotoCorp and Bajaj Auto.

JPMorgan is neutral on Eicher Motors with a target of Rs 4,230. Analysts expect short-term challenges for the VECV joint venture due to elections and infrastructure slowdown. Further stock gains are seen as limited, with current prices reflecting positive market share momentum, new products, and export recovery.

Nuvama Institutional Equities maintains a 'hold' rating on Eicher Motors, citing intense competition faced by Royal Enfield (RE) from global brands, which is expected to continue. Analysts anticipate sustained underperformance, projecting a moderate volume growth of 5 percent in the domestic market from FY24 to FY26.