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Summary is AI Generated. Newsroom Reviewed
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Two-wheeler stocks grew around 11% in the year, driven by demand recovery and policies
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GST 2.0 tax cuts boosted mass-market vehicle demand in the year's latter half
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Hero is valued cheapest, TVS most expensive; Bajaj trades near industry PE average
During the year, two-wheeler stocks have delivered excellent returns and seen highest growth (around 11%), with good contributions coming from all fronts. The expectations ahead are that the demand recovery coupled with supportive govt policies will continue to provide the necessary fuel to keep the growth momentum going.
The latter half of the year showed a sharp turnaround, aided by GST 2.0 rate rationalisation, which reduced taxes on mass-market vehicles, reviving demand across passenger and commercial mobility categories. While other segments were somewhat sluggish in the first half of the year, the 2W segment continued to perform well.
The market has rewarded these positive developments in the company’s working with a strong push to the stock prices. In the table only the top names are being considered as the smaller, newer entrants (mainly in EV) are yet to make a profit.
| Price Moves Pre-GST cut | Price moves Post GST cut | PE ratio | |
|---|---|---|---|
| HERO MOTOR | 13% | 23% | 21.77 |
| TVS MOTOR | 26% | 23% | 68.81 |
| BAJAJ AUTO | -6% | 14% | 32.06 |
| EICHER MOTOR | 18% | 27% | 40.33 |
On the valuation front it would seem like Hero is the cheapest, while TVS is the most expensive. Bajaj Auto is trading around the Industry PE average and has shown a strong rebound in price action compared to the first half (-6% to 14%), while all the others have built on good gains made in the first half already. From that angle, Bajaj Auto should be worth a dekko here as the market seems to have found something positive about it.
Checking out a relative performance graph, here is what we can note.
The four stocks are plotted against the Cnx Auto, not exactly the perfect match because that index also includes PV and CV manufacturers. But you get the same answers if you plot the four stocks against one another too.
The Auto index has hit all-time new highs as we all know and within that, the best relative performer is Eicher Motor with TVS a close second. Hero is third and Bajaj Auto is a lowly fourth. Here is another chart of individual stocks for the last couple of years.
Barring Bajaj, the other three have seen brisk upward price actions. Hero has seen the max movements, falling around 45% into the March 2025 low and recovering 90% since then. Bajaj, on the other hand, has also fallen 40% into March 2025 low but has so far managed to recover just 28% from that low. Evidently, bulls are slow to react when it comes to Bajaj Auto.
The moves on the charts, barring Bajaj, look to be Impulses while that on Bajaj smacks of one being a corrective. This is a discouraging discovery for those that are building bullish cases for Bajaj.
While the Q2 results for Bajaj did show some good turnaround, the others were no slouch either. The market seems happy to give the highest valuation for TVS, perhaps since they have topped in the eV category as well, while also making strides in the 3W segment. But at 68x PE, it does seem difficult to justify new buys in TVS at the moment. Eicher’s valuations (40x) appear more attractive and the price action too is quite robust. So between the two, I would rather choose Eicher if I have to.
In the very short term, Hero has already signalled a short-term high, but Bajaj seems to be still in a mood to continue its rally. Perhaps the possibility that it has room to play catch up with the other three may be inviting some punting action into the stock. Such a pullback may have a possible target zone till around 10,000 levels or so, leaving some 5% to the upside (or a bit more if market trends are supportive) and, therefore, it seems only like a tradable bet among the two-wheeler stocks.
Some profit taking appears to be emerging in TVS and Hero but no evidence of that seen as yet in Eicher, which continues to power its way higher. Thus, Eicher seems to be the best bet yet among the lot.
Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.
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