The auto sector is going through a perfect storm, said Aditya Makharia, senior analyst – automobiles, HDFC Securities on Thursday. On stocks, Makharia said he prefers Bharat Forge and Tata Motors while adding that one should have a long-term view on Maruti Suzuki.
“You are seeing both demand and supply constraints, perhaps at the same time,” he said.
The overall sales for August have been a mixed bag even as improvement is seen in the commercial vehicles segment. While Ashok Leyland, Tata Motors, and Volvo have done pretty well, the rural facing companies like Escorts, Hero MotoCorp have been under pressure.
From the CV space, Makharia said he likes Bharat Forge, Tata Motors.
On Hero MotoCorp, he said there is going to be a sluggish outlook.
“The stock has corrected quite a bit from the peak levels. And maybe some of the valuations now are fairly reasonable. While the demand outlook is unclear, the only thing to notice here is that Hero will also be launching its electric vehicles (EVs), hopefully in the fourth quarter, which is by March of this year.”
Maruti is an interesting buy but one should have a longer-term horizon, according to Makharia.
“Maruti is going to be well-positioned in the medium-term horizon to cater to the emission challenges. In the medium term, Maruti is going to do a couple of things which hopefully should play out in its favour – SUV product launches expected from the company should come through in 2022,” he said.
For the full interview, watch the accompanying video.