Tata Motors, Bharat Forge among Emkay’s top picks in auto sector

Emkay Global’s latest research on the auto sector has picked six auto and auto ancillaries stocks to bet on as economy recovers. The brokerage firm believes that amid a healthy recovery, rising commodity price inflation has caused automobile prices to rise.

Emkay’s top picks among Original Equipment Manufacturers (OEMs) include Tata Motors with a target price of ₹375, Ashok Leyland with a target price of ₹155, Maruti Suzuki with a target price of ₹9,000 and Eicher Motors with a target price of ₹3,300). In auto ancillaries, the brokerage is betting on Bharat Forge with a target price of ₹760 and Apollo Tyres with a target price of ₹306.

''We expect demand growth to be robust across segments in FY22E, with 86% growth in MHCVs, 29% in PVs and 19% in 2Ws, aided by improving macros, long-overdue replacement cycle, low interest rates, improving finance availability and favorable base effect'', said the brokerage in its report.

Emkay's recent channel checks indicate that price increases have not significantly impacted demand across segments, except for the demand pressure seen in entry-level 2-Wheelers (2Ws).

''OEMs expect price increases to cover a major chunk of commodity inflation, and the rest will be gradually offset through cost savings and better mix'', the Emkay report added. ''Our positive view on the Automobile sector is underpinned by expectations of a strong cyclical upturn, which is expected to last for at least three years''.