Bajaj Auto, Hero MotoCorp, Eicher, TVS Motor: CLSA downgrades 2-wheeler stocks, revises share price targets

CLSA has lowered its ratings on three two-wheeler stocks while maintaining a 'Sell' call on the fourth one, as it believes auto stocks are now fairly valued after the recent rally. The foreign brokerage cited year-on-year (YoY) increase of 8 per cent in domestic industry volumes during the festive months of September-November as a key reason for rally in share prices of two-wheeler companies.

"We believe the upside in the stocks has reduced due to recent rally in stock prices. Hence, we downgrade the stocks and turn cautious as valuations are pricing in double-digit growth in volumes over next few years already," CLSA said.

The broking firm said margins in electric two-wheeler are likely to remain challenging in near-term as all OEMs are planning to launch more affordable electric scooters. It downgraded Bajaj Auto to 'Underperform' from 'Outperform' but revised its target price on the stock upward to Rs 6,382 against Rs 5,670 earlier.

CLSA cuts its rating on Eicher Motors to 'Underperform' from 'Buy', with a lower target price of Rs 4,129 from Rs 4,252. For Hero MotoCorp, CLSA reduced its rating to 'Outperform' from 'Buy' but revised upward its target price to Rs 4,127 against Rs 3,701 earlier. Meanwhile, the foreign brokerage maintained its 'Sell' on TVS Motor, with revised target price of Rs 1,378 against Rs 1,206 earlier.

CLSA increased Bajaj Auto's target price as it has increased its volume assumptions by 3.7 per cent for FY24 and 2.7 per cent for FY25. It cut Eicher Motors' target as it expects new competitors Harley and Triumph to gain market share from Royal Enfield. The Eicher Motors stock, it said, builds in 10 per cent compounded annual growth rate in volumes for Royal Enfield, which is CLSA's base case for Enfield’s growth prospects.

CLSA's downgrade of Hero MotoCorp came in due to a account of sharp rally in its share price but upgraded its target price to factor in an increase in volume estimates in premium motorcycle and electric scooters segments. TVS Motor's target price was also revised upward despite a 'Sell' call as CLSA upped its volume estimates for FY24 by 5.3 per cent and FY225 estimates by 7.1 per cent. TVS has been gaining share in executive motorcycle segment with successful launch of Raider, it noted.

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

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