| Company | Value | Change | %Change |
|---|
Jefferies has cut its price target on Bajaj Auto to ₹10,350 from ₹13,400 earlier, while Hero MotoCorp’s price target has been cut to ₹4,900 from ₹5,500 earlier.
On the flip side, Jefferies has raised its price target for Eicher Motors to ₹6,600 from ₹5,500 earlier and for Mahindra and Mahindra to ₹4,075 from ₹3,700 earlier.
Jefferies has highlighted Mahindra & Mahindra, Eicher Motors and TVS Motor as their preferred “buy” recommendations, even as it has a “buy” rating on both Bajaj Auto and Hero Moto.
Two-wheeler demand lagged PV demand over financial year 2021-2023 as the combind effect of Covid-19 and regulatory cost push impacted vehicle affordability. However, two-wheeler wholesales grew in financial year 2024, outperforming PVs.
Jefferies believes that the tractor industry is poised for a strong cyclical recovery. It is expecting two-wheelers and tractors to grow at a Compounded Annual Growth Rate (CAGR) of 13% and 15% respectively over financial year 2025 – 2027 and Passenger Vehicles and Trucks to grow at an 8% and 5% CAGR over the same timeframe respectively.
“We expect earnings momentum in autos to continue in the coming years and expect double-digit EPS CAGR for our coverage stocks over FY24-27,” Jefferies wrote in its note, adding that TVS will deliver the strongest EPS CAGR at 30%, followed by M&M (20%) and Eicher Motors (16%) over the same timeframe.
The brokerage said that the valuations are not cheap post the rally in 2024 but the multiple premium should sustain given the better growth outlook and a strong or improving franchise.
Shares of Bajaj Auto have corrected 31% from their peak, while those of Hero MotoCorp have corrected by 33%. On the flip side, shares of Eicher Motors recently hit a record high post the December sales figures of Royal Enfield.
