Motilal Oswal maintains 'BUY' on 4 auto stocks

Brokerage firm Motilal Oswal on Thursday said it has maintained `BUY` rating on four auto stocks: Maruti Suzuki, Eicher Motors, Mahindra & Mahindra and Tata Motors. It has assigned a neutral rating on Escorts after auto majors came out with their sales figures recently.

This comes amid a sharp decline in sales of automobiles and massive job losses. Several auto majors including Maruti Suzuki, one of India`s biggest automakers, have announced huge production cuts and frequent non-working days as demand continues to fall.

On Maruti Suzuki, where domestic sales increased by 4 per cent YoY and while its exports grew by 10 per cent YoY the brokerage firm said: "We are estimating FY20 volumes to decline 17 per cent YoY, implying a residual decline of 18 per cent. We see an upside risk to our volume estimate, particularly due to limited impact of BSVI transition for MSIL."

On Mahindra and Mahindra, the brokerage said that "we have factored in 6.5 per cent decline in tractor volumes for FY20". It noted that M&M`s domestic passenger UV segment grew 10 per cent YoY while the domestic pick-up segment declined 2 per cent YoY.

"We estimate UV volumes to decline 20 per cent in FY20, implying 38 per cent residual decline, due to expectations of disruption during BSVI transition. 3W volumes increased 15 per cent YoY to 5.4k units. Maintain Buy," it said.

It assigned Tata Motors` "BUY", despite the report noting its CV sales declined 15 per cent YoY while PVs declined 12 per cent YoY.

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A neutral rating was assigned to Escorts taking into account the 11 per cent decline in tractor dispatches "to 4.1k units (v/s est. 4.4k units) in Dec `19".

"Domestic sales were down 10 per cent YoY to 3.8k units. Exports declined 20 per cent YoY to 308 units. The stock trades at 11.5x/10.1x FY20/FY21E EPS. Maintain Neutral."