The Indian automotive sector is poised for a significant upcycle, according to BofA. The brokerage firm's positive outlook on the sector is driven by what it calls the 5Cs of the Auto Cycle, which are well-aligned, indicating that the industry is getting in the fast lane.
In line with this bullish view, BofA has maintained a "Buy" rating on several key players and has also hiked the target price for all the companies it covers.
Upcycle Drivers And Market Segments
BofA's analysis points to specific trends within different vehicle segments. The two-wheeler market is transforming into an "upgrader market", a notable shift from the previous reliance on a recovery in the entry-level segment driven by rural demand.
For the passenger vehicle segment, the focus is shifting from premiumisation to penetration, though the report emphasises that product offerings and innovation remain crucial for success.
The brokerage has increased the price target on the following companies.
Eicher Motors: Target price hiked to Rs 7,500 from Rs 6,300.
Maruti Suzuki: Target price hiked to Rs 17,000 from Rs 14,000.
Mahindra & Mahindra: Target price hiked to Rs 4,000 from Rs 3,750.
Ratings And Top Picks
BofA has a "Buy" rating on its three top picks, which include Maruti Suzuki, Eicher, and Mahindra. While maintaining a "Neutral" rating on several other auto stocks, the brokerage still revised their target prices upward for the following stocks:
Bajaj Auto: Target price hiked to Rs 9,600 from Rs 8,850.
Hero MotoCorp: Target price hiked to Rs 5,650 from Rs 4,800.
TVS Motors: Target price hiked to Rs 3,725 from Rs 2,900.
Hyundai: Target price hiked to Rs 2,700 from Rs 2,200.
The only company with an "underperform" rating is Ola, despite a slight increase in its target price to Rs 48 from Rs 45.
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