Auto Index on the which trailed the benchmark index in 2007 is suffering from higher interest rates. Will the auto stock continue to suffer or will it revive its glory in 2008. Here’s guide to help you to pick the good and reject the bad. Hindustan Times conducted a survey to find out stocks to avoid in 2008. 13 brokers registered their opinions in the survey. Here are their recommendations for Auto Stocks.
Hero Honda, Bajaj Auto and TVS:
Expected to be an underperformer in 2008.Referring to Hero Honda, Ashish Kapur, CEO, Invest Shoppe says: “Two-wheeler manufacturers are struggling to protect their margins. Bajaj Auto is trying to restructure to wriggle itself out of this situation. The sector may take some more time to get back its lost charm.” Another research head of a broking house said that Bajaj Auto was planning to counter the lull in the two-wheeler market by launching new products, even on the back of its phenomenal success in establishing itself in the bikes segment. TVS Motors was voted down by two brokerages.
Tata Motors,M&M and Ashok Leyland:
Among the heavy vehicle manufacturers, Ashok Leyland is also expected to under-perform according to a broking house. The reason: Lack of new products and clear direction of growth. However, Tata Motors is expected to perform well, the analyst added. Punjab Tractors, which was acquired by Mahindra & Mahindra recently, would take at least 18 months to expand its market across India from its focus on North India.Given the market is at its peak already, the investors seem to look for some exciting news or expectation from the companies.“The market is looking for opportunities that excite them, where value unlocking can happen through mergers and acquisitions, scalability, turnaround etc. The market is not interested in stocks that offer just 10-15 per cent growth,” Kapoor added.
Maruti Suzuki:
Suzuki’s indian chairman may say, it is ready to cut don profits to retain the market share. But india’s leading car maker seems to be investors choice for 2008.
On the back of a sound foundation of existing products (13 models priced between Rs 2 lakh and Rs 15 lakh), strong distribution, efficient service network and new product launches, Maruti Suzuki will maintain its dominant position. The company has 52 per cent market share by volume of the Indian car market and 62.5 per cent of the small car segment, which is commendable given the stiff competition from global majors. Maruti grew at a scorching 18 per cent, compared with the 13 per cent recorded by passenger car market in H1 FY08. For eight months ended November 2007, sales volume was up 19.7 per cent to 500,108 vehicles led by 49 per cent growth in exports. Notably, exports are expected to grow 40 per cent annually for the next two years; its share in total sales is likely to move up to 12 per cent in 2010 from 7 per cent in FY07. Maruti is already augmenting capacities by 3 lakh in a phased manner by FY10 to a million units. Besides, it has lined up Splash (A2 segment) and the concept car A-Star (A1 segment), while a Swift sedan (dezire) is on the cards. These will help earnings grow by 20 per cent annually in the next two years. Aggressive pricing, enhanced margins on the back of improved product mix, indigenisation and scale benefits, will help Maruti do well.