TVS Motor, Bajaj Auto HSBC's Preferred Picks Among 2-Wheelers; Ola Electric Downgraded To 'Hold'

TVS Motor Company Ltd. and Bajaj Auto are HSBC's preferred picks among two-wheeler stocks as the brokerage believes the recent correction in these stocks has made risk-reward favourable.

At the same time, the brokerage noted, that Ola Electric has consistently disappointed on volumes, largely led by quality and service issues. This has led to its rating downgrade for the stock to 'hold' from 'buy'. It has also lowered its target price to Rs 70 from Rs 100 earlier, implying a Rs 4 upside.

TVS has been upgraded to a 'buy' with a target of Rs 2,800, implying a 11% upside. The brokerage believes that the company arguably has the most established R&D capacity amongst the 2W OEMs and it has been able to maintain its share in the domestic market and has gained decent traction in EVs as well.

"We see this as a positive back-drop for TVS in the medium term. Finally, TVS continues to gain traction in export markets as well," it said, noting that the stock has corrected by 25% from the top.

Further, HSBC admitted that losses in subsidiaries like Norton remain a worry for it, but standalone margins have high visibility, thanks to PLI accruals from 4Q as well.

On Bajaj Auto, it has maintained its 'buy' rating, given a diversified earnings profile and reasonable valuations post the recent stock correction.

However, it has lowered its target to Rs 10,500 from Rs 11,500 on assumption of a lower long-term growth rate.

While impending launch of e-rickshaw is an upside catalyst and it expects Bajaj’s motorcycle market share to stabilise in 2025, a further loss of market share is a downside risk, HSBC said.

On Ola Electric, the brokerage noted, that the company has addressed the service issues and it is scheduled to launch an EV motorcycle soon. Competition catch-up has also been aggressive, it added.

Ola’s market share is down to 23%, from 1QFY25’s peak of 49%, and the confidence in medium- to long-term estimates has also waned, according to the brokerage.