Domestic stock markets continue to remain volatile, faced with multiple headwinds including rising inflation and interest rate hikes. On Friday, BSE Sensex was down 744 points or 1.35%, hovering around 54,575 while the NSE Nifty 50 index tanked more than 200 points or 1.3% to give up 16,200. Analysts have been recommending stock-specific action to shield portfolios from uncertainty. “Aggressive rate hikes by global central banks on the back of continued inflationary pressures are the near-term risk while earlier than expected peaking of Inflation would drive the market,” Angel One said in a note. The brokerage firm has pinned four auto stocks that they believe could rally, giving investors as much as 60% returns.
Ashok Leyland: BUYTarget price: Rs 164 per shareUpside: 20%
Shares of Ashok Leyland have gained 7% so far this year, outperforming benchmark Nifty 50 and Sensex along with the Nifty Auto index. Medium and heavy commercial vehicles (MHCV) industry production volumes have been at the lowest levels seen in close to 12 years and analysts believe that the company is ideally placed to capture the growth revival in the CV segment. “We believe that Ashok Leyland will be the biggest beneficiary of the Government’s voluntary scrappage policy and hence rate the stock a BUY,” they added.
Sona BLW Precision Forgings: BUYTarget price: Rs 843Upside: 40%
Sona BLW is one of India’s leading automotive technology companies, deriving close to 40% of its revenues from Battery Electric Vehicles (BEV) and Hybrid Vehicles. So far this year the stock has not performed well, falling 19%. However, analysts believe the tide will turn. “Given the traction in the BEV/Hybrid Vehicle space, we believe that Sona Comstar will continue to command a higher multiple, which is justified by ~49% earnings CAGR over FY21-24E,” Angel One said. Sona BLW has a strong market share ranging from 55-90% for differential gears for PV, CV, and tractor OEMs in India.
The set target price suggests a 40% upside from current levels.
Ramakrishna Forgings: BUYTarget price: Rs 162Upside: 58%
The stock has fallen 14% in 2022, underperforming the benchmark indices. Ramkrishna Forgings is a leading forging player in India and among a select few having the heavy press, stands to benefit from a favourable demand outlook for the Medium and Heavy Commercial Vehicle industry in domestic and other key geographies in the near term, analysts said. “The company has phased out its CAPEX over the past few years during which it was impacted by industry slowdown in certain periods. With the end to the CAPEX cycle, the favourable outlook in the medium term, and sufficient capacity in place, we believe Ramakrishna Forgings’ volumes would be able to post volume CAGR of 29% over FY21-23E,” they added.
The stock trades at Rs 162 per share currently, which translates to an upside potential of 58%.
Suprajit Engineering: BUYTarget price: Rs 485Upside: 60%
Suprajit Engineering is a large supplier of automotive cables to the domestic OEMs with a presence across both 2Ws and PVs. The company has diversified exposure, which coupled with its proposition of low-cost player has enabled it to gain market share and more business from existing customers. The stock has tanked a massive 33% so far in 2022. “Suprajit Engineering has grown profitably over the years and as a result, it boasts a strong balance sheet (net cash). We believe it is a prime beneficiary of a ramp-up in production by OEMs across the globe and is well insulated from the threat of EV (is developing new products). Its premium valuations are justified in our opinion owing to its strong outlook and top-grade quality of earnings,” analysts said.
To reach the target price, shares of Suprajit will have to zoom 60% from current levels of Rs 303 per share.
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