Why are brokerage houses bullish on auto stocks?

Brokerage houses recently raised their target price on four auto stocks—Eicher Motors, Maruti Suzuki, TVS Motor, and Mahindra & Mahindra (M&M)—expecting a rise in sales during the festival season.

According to Zee Business research, record sales of more than 10 lakh units of vehicles are expected in the upcoming festival season as original equipment manufacturers (OEM) have increased production by 25 per cent to meet order needs.

Meanwhile, in a period from July to September, passenger vehicle (PV) sales have increased 8 per cent to 10 per cent and are expected to rise 6 per cent to 8 per cent during festivals. 

Further, as per research, in FY24, 8 per cent to 10 per cent volume growth in the PV industry is expected, and by FY25, the volume growth is expected to grow 4 per cent to 5 per cent. 

The research further stated that dealer-level inventory was at a six-week high, and the inventory may be reduced after the festival season. 

As per research, M&M's market share will increase in FY24. 

What do brokerages recommend on auto stocks?

Five global brokerage houses--Citi, Jefferies, Morgan Stanley, Bernstein, and HSBC-- have raised their targets on Maruti Suzuki. 

Apart from that, Jefferies has also raised its target on Eicher Motors and TVS Motor.

Meanwhile, HSBC has raised its target on M&M. 

Auto stock's share price 

In 2023 so far, the stock of of TVS Motor has gained over 43 per cent, Maruti Suzuki has gained over 25 per cent, Eicher Motors has risen over 8 per cent, and M&M has gained over 26 per cent against the Nifty 50's rise of over 8 per cent. 

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