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Business News/ Markets / Stock Markets/  Bajaj Auto, TVS Motor: Here's why Goldman Sachs expects better than estimated earnings
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Bajaj Auto, TVS Motor: Here's why Goldman Sachs expects better than estimated earnings

Stock Market Today: Goldman Sachs in their Q3 Preview report has highlighted that post festive demand momentum points to upside risk on two wheelers. They see EPS upside to current consensus estimates for Bajaj Auto , TVS Motor. Key reasons for the same

Post festive demand momentum points to upside risk on two wheelers said Goldman Sachs in their Q3 preview report.. They see EPS upside to current consensus estimates for Bajaj Auto , TVS Motor. Key ReasonsPremium
Post festive demand momentum points to upside risk on two wheelers said Goldman Sachs in their Q3 preview report.. They see EPS upside to current consensus estimates for Bajaj Auto , TVS Motor. Key Reasons

Auto OEM (original Equipment manufacturers) are likely to report strong Q3 earnings being led by two wheelers and Passenger vehicles sales. Favorable festival season sales uptick followed by boost provided by wedding season sales, has lifted overall performance for two wheelers and Passenger vehicles during the October-December quarter.

As two wheelers are likely to report better Q3 performance Goldman Sachs Equity Research in Q3 result preview report has said that “Post festive demand momentum points to upside risk on two wheelers". Analysts at Goldman Sachs said that specifically for the quarter, we see EPS (earnings per share) upside to current consensus estimates at Bajaj Auto , TVS Motor . Quarterly numbers at Sell-rated Hero MotoCorp could also benefit from the recent round of price hikes taken by the company, they added.

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Rationale for target price and earnings estimates change

TVS Motor Company-  Goldman Sachs has revised target price upwards by 14% as they revised EPS estimates for FY25 and FY26 upwards by 3.7% and 10.3% respectively. Goldman Sachs analysts said that “We update our model for improving mix of Apache premium range of motorcycles, declining EV battery prices, ongoing benign raw material prices, slight rupee depreciation supporting export business profitability, and quarterly roll forward.

Bajaj Auto – Goldman Sachs has revised its target price for Bajaj auto also upwards by 14%, following 3% and 6.5% upwards revision in FY25 and FY26 earnings estimate. Higher-than-expected volume sequentially, declining EV battery prices, ongoing benign raw material prices, slight rupee depreciation supporting export business profitability and recent price moderation on Pulsar 125 / 150 as well as lower sequential export business mix, are amongst key reasons for them revising target prices and earnings estimates.

Hero MotoCorp also has seen 13% upward revision in its target price by Goldman Sachs. Higher than expected volumes sequentially, ongoing benign raw material prices, price hikes taken in December quarter (Hero was only notable company in two wheelers to push through price hikes in 3Q24) and company’s push, are prominent reasons sighted by Goldman Sachs to do so.

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Q3 preview

Analysts at Goldman Sachs have updated their India Auto OEMs coverage estimates (ex-Tata motors) heading into 3Q24 to factor in ongoing benign raw material prices, company specific mix shifts, forex moves (rupee depreciation versus dollar, Japanese Yen appreciation versus Rupee, Pickup in marketing costs around Cricket World Cup, Price actions by OEMs before and during festive season; Updated share counts post recent stake dilutions.

Analysts at Goldman Sachs also said that they like longer term risk reward at Buy rated names as Eicher Motors, Mahindra & Mahindra and Ashok Leyland, given the improving mix, larger role of more profitable exports and product pipeline momentum at these names, all available at more reasonable valuation versus own history.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions

 

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ABOUT THE AUTHOR
Ujjval Jauhari
Ujjval Jauhari is a deputy editor at Mint, with over a decade of experience in newspapers and digital news platforms. He is skilled in storytelling, reporting, analysing and writing about stocks, investment ideas, markets, corporates and more. He is based in New Delhi.
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Published: 09 Jan 2024, 10:52 AM IST
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