Sharing its top stock picks in the autos space, brokerage and research firm ICICI Securities said it expects Q4FY22 results for the auto companies to be slightly positive (sequentially) for passenger vehicle (PV) and CV players as against 2W makers, with Q1FY23E profitability to be worse across segments.
“With higher dependence on steel, CVs should be able to manage gross margins better vs other segments given the latter’s higher dependence on aluminium and plastics. We continue to prefer commercial vehicle (CV) players over personal mobility segments,” the note on the fourth quarter preview of autos and auto ancilliaries stated.
Its top three auto stock picks are Tata Motors, TVS Motor Company, and Ashok Leyland. ICICI Securities also has Buy stance on Eicher Motors, Maruti Suzuki, Apollo Tyres, Asahi India Glass, Balkrishna Industries, Bharat Forge.
The brokerage house has add recommendations on Mahindra & Mahindra, Motherson Sumi Sytems, and Sansera Engineering Hold ratings on Bajaj Auto, Hero MotoCorp.
Capability to gradually improve production in coming months depending on chip supplies, capability to increase prices to cover the under-recoveries of commodity inflation, and cost-reduction measures taken are some of the key factors to watch out for, as per the brokerage.
“We believe, in Q1FY23, with bulk of the commodity inflation effect seeping into the P/L along with lack of seasonality benefit in volumes, profitability across the space would be under stress. During Q4FY22, 2W players too would face the challenge of lack of support from operating leverage,” ICICI Securities added.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.