The launch of the Nano is not only set to change the dynamics of the domestic market but will also give the global biggies a lot of competition. Other players such as Hyundai, GM, Toyota, Bajaj, Renault and Nissan will soon join the bandwagon. Auto sales in Feb clocked a 10% growth y-o-y. The sector is expected to do well with low fuel prices and interest rates and new launches. SundayET takes a peek into the recommendations of top brokerage houses for the auto sector.LARGE CAP
HERO HONDA CMP: Rs 1,085
Hero Honda commands a leadership position in the two-wheeler industry with a market share of 41% in 2008. We expect the sales of the company to grow at 9% CAGR from 3.33 mn to 4.28 mn over 2008-11. The contribution from exports is less and hence it is relatively immune to the global slowdown.
TATA MOTORS CMP: Rs 189
The launch of the Nano and decreased input costs are positive signs. Tata Motors is likely to repeat the success mantra of Indica through its people’s car Nano. The favourable demographics — lower car penetration & good percentage of population that can afford a Rs 1 lakh car in India — clearly indicates a huge demand for a Nano.
MID CAP
EXIDE INDUSTRIES CMP: Rs 41
Exide Industries is the largest manufacturer of lead acid storage batteries in India with 25% revenue share. It holds 75-80% market share in the OEM space. Also, it has exposure to a large number of sectors such as auto, submarine, telecom, power and railways, providing it a natural hedge against any contraction in a particular sector.
ASHOK LEYLAND CMP: Rs 19
The changes in product mix in favour of the passenger vehicle segment has impacted the company positively. It has entered into an initial pact to form a JV with Nissan Motor for development, manufacture and distribution of LCV products. As it has a negligible presence in the LCV space, this deal would be positive in the long run.
SMALL CAP
RICO AUTO CMP: Rs 9
Rico Auto is a leading OEM and its clientele includes Honda, Hero Honda, Maruti, GM, Tata, Ford, Jaguar and Land Rover. Hero Honda will perform better on high demand from two-wheeler segment, which in turn benefits Rico Auto, as it gets significant share of revenues from Hero Honda. It will also be benefited from Tata’s Nano.
SONA KOYO STEERING CMP: Rs 8
It increased capacities in line with its announced investment plan of Rs 400 crore of which Rs 300-crore capex is complete. It received new Rs 76-crore orders from Nissan and Maruti. It also commenced production of steering columns for General Motors and steering gears and columns for Hyundai’s new model in the last quarter.
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