Auto stocks skid after CLSA downgrade


by mydhanush on 6 December 2023,  5 min read

Auto stocks skid after CLSA downgrade - Dhanush by Ashika

In a significant milestone, vehicle retail sales soared to a historic high in November 2023, reaching 28.54 lakh units, as reported by the Federation of Automobile Dealers Associations (FADA)

This surpasses the previous record of 25.69 lakh vehicles sold in March 2020.

Two-wheeler, passenger vehicle segments showcase exceptional performances

Both the two-wheeler (2W) and passenger vehicle (PV) segments showcased exceptional performances, achieving unprecedented milestones. 

Two-wheelers experienced a significant surge, with 22.47 lakh vehicles sold, surpassing the prior record of 20.7 lakh vehicles in March 2020. 

Likewise, the PV category reached 3.6 lakh vehicles, surpassing the sales figures from October 2022, which stood at 3.57 lakh vehicles.

Top stock market news on December 6

Overall Growth

In November 2023, there was a notable 18 percent year-on-year (YoY) increase in total retail sales. The two-wheeler, three-wheeler, and passenger vehicle categories demonstrated strong YoY growth rates of 21 percent, 23 percent, and 17 percent, respectively. 

However, the tractor and commercial vehicle (CV) segments faced declines of -21 percent and -2 percent.

However, the Nifty Auto index traded in the red on December 6 after CLSA downgraded 2-wheeler companies Bajaj Auto, Hero MotoCorp and Eicher Motors, according to media reports.

On December 6, attention will be on two-wheeler giants Bajaj Auto, Hero MotoCorp, and Eicher Motors following a downgrade by CLSA. 

The firm cited that these stocks had reached fair valuation levels due to a recent substantial surge in prices. Additionally, CLSA maintained its “sell” recommendation for TVS Motor. This move indicates a cautious stance regarding these companies’ stock performance based on their current valuations and market trends.

According to analysts at CLSA in their note dated December 6, they anticipate ongoing difficulties with margins in the electric two-wheeler segment in the near future. This outlook is driven by the collective plans of all original equipment manufacturers (OEMs) to introduce more cost-effective electric scooters. 

Bajaj Auto gets downgraded

Specifically, CLSA downgraded Bajaj Auto from an “outperform” to an “underperform” rating, setting a target price of Rs 6,382 per share. 

This adjustment reflects CLSA’s revised perspective on Bajaj Auto’s performance in light of market dynamics and their analysis of the electric two-wheeler sector.

Eicher Motors downgraded to underperform from buy

Eicher Motors has been downgraded to “underperform” from “buy” with a target price of Rs 4,129.

Hero MotoCorp shifted from buy to outperform rating

CLSA has shifted its rating on Hero MotoCorp from a “buy” to an “outperform” stance. It has revised its target price to Rs 4,127. 

TVS Motor retained with sell rating

Meanwhile, the firm has upheld its “sell” recommendation for TVS Motor, maintaining a target price of Rs 1,378. 

These adjustments reflect CLSA’s updated assessments of the companies’ performances. It signals a more favorable outlook for Hero MotoCorp compared to its previous “buy” rating. It maintained cautious with a “sell” stance on TVS Motor.

Disclaimer: The information provided in this blog post is for informational purposes only and should not be construed as investment or trading advice. The author is not a financial advisor and does not have any professional qualifications in this area. The author does not guarantee the accuracy or completeness of the information provided. Any action you take based on the information in this blog post is done at your own risk. Please consult with a financial advisor before making any investment decisions.

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