Bank Of America Merrill Lynch Buys Into India’s Passenger Vehicles Story

Investment bank Bank of America Merrill Lynch sees long term opportunities in the Indian passenger vehicles sector and reinstated coverage on it on Tuesday. Volumes in the sector may touch 5 million units in 2021 which could make India the third largest passenger vehicles market in the world from its current fifth position, BofA ML said in a report. Demand will accelerate in line with improvement in the country’s gross domestic product (GDP) followed by improved savings on account of the 7th Pay Commission outlay and advantages offered by the Goods and Services Tax (GST), the report adds. Moreover, entry barriers are likely to lead to improvement in profitability for large original equipment manufacturers (OEM).

On Maruti Suzuki

• Initiates ‘buy’ rating with price target of Rs 6,235 per share
• Says company’s volume growth continues to outpace peers owing to new launches
• Expects volumes to grow at 12 percent compounded annual growth rate (CAGR) over financial years 2016 through 2019.
• Expects earnings per share CAGR over the same period at 27 percent

On Tata Motors

• Initiates ‘buy’ rating with price target of Rs 625 per share
• Says new platforms to be launched in financial year 2018
• Expects market share in the domestic markets to improve

On Mahindra & Mahindra

• Initiates ‘neutral’ rating with price target of Rs 1,550 per share
• Notes that company has seen a drop in market share but has launched multiple platforms over past two years
• Says market share will eventually improve on account of these launches