After BofA, Morgan Stanley Raises Target Prices For Top Automakers Like Maruti, Hyundai, M&M — Check Details
Morgan Stanley has hiked the target prices for all the auto players they cover, except one. The sector is entering an upcycle, it said and the positive momentum is due to the GST rationalisation.
The Nifty Auto has rallied over 5% since Finance Minister Nirmala Sitharaman announced mega GST reforms to benefit the common man on Sep. 3. As a result, brokerages have been largely bullish on the sector and firms like BofA and Morgan Stanley have backed their positive outlook with upgrades and target price hikes for key players like Maruti, Hyundai, Mahindra and Mahindra amongst others.
After BofA's upgrades on Tuesday, Morgan Stanley has followed suit and hiked the target prices for all the top auto players they cover, barring one. The sector is entering an upcycle, according to Morgan Stanley and the sector's positive momentum is supported by the GST rationalisation. This is the case as the rate cuts could lead to unprecedented price cuts for consumers.
Additionally, they also cite monetary easing and the implementation of the 8th Pay Commission to further boost demand.
Target Price and Rating Updates
The brokerage maintains a bullish stance on most of the major players in the auto industry with stock rating upgrades and hiking price hikes. The only player receiving a downgrade is Bajaj Auto. Morgan Stanley's auto sector upgrade comes a day after BofA's target price hikes.
Maruti: The brokerage maintains an overweight rating and has increased its target price to Rs 18,360 from Rs 14,262.
Hyundai: Retaining an overweight rating, the target price has been raised to Rs 3,066 from Rs 2,241.
M&M: The rating remains Overweight, with a target price hike to Rs 4,321 from Rs 3,668.
Ashok Leyland: The brokerage holds an overweight rating and has increased the target price to Rs 152 from Rs 144.
TVS Motors: With an overweight rating, the target price has been raised to Rs 3,933 from Rs 3,126.
Hero Moto: The rating has been upgraded to Equal-weight from Underweight, and the target price has been significantly increased to Rs 5,968 from Rs 3,765.
Eicher: This stock has also seen an upgrade to Equal-weight from Underweight, with the target price raised to Rs 7,201 from Rs 4,079.
Bajaj Auto: In a contrasting move, the stock has been downgraded to Underweight from Equal-weight, and the target price has been reduced to Rs 8,075 from Rs 9,117.
Positive Outlook
The brokerage suggests that the current positive momentum is driven by several macroeconomic tailwinds. The GST rationalisation is a key factor, with potential price reductions expected to be a major catalyst for consumer demand.
This, combined with monetary easing and the financial support from the 8th Pay Commission, is expected to give a boost to the demand environment. The note also indicates that profit margins could see an upside surprise, as past cycles have shown that multiples tend to peak around the time margins are at their highest.
