Top Picks in the Auto Sector: TVS, Eicher, Bajaj Auto, and Tata Motors Shine, Says Jefferies

Jefferies, a well-known financial services company, has highlighted its preferred choices in the auto industry, favoring TVS Motor, Eicher Motors, Bajaj Auto, and Tata Motors. The review of February’s automobile wholesale numbers indicates a robust growth in two-wheeler sales, particularly for TVS and Bajaj Auto, while passenger vehicles maintained a steady performance. However, commercial vehicles experienced a slight decline, and tractor sales faced strong degrowth.

According to Jefferies analysts, the divergence in wholesale growth across different segments in February showcased a 35% year-on-year increase for two-wheelers and 11% for passenger vehicles. In contrast, trucks and tractors witnessed a decline of 14-18% year-on-year.

Two-wheelers stole the show, surpassing expectations with double-digit growth in February. Analysts at Anand Rathi Research noted that two-wheeler wholesale volumes exceeded predictions, driven by higher-than-expected retail sales (up 13%) and effective channel filling, especially for Honda two-wheelers. TVS and Bajaj Auto reported the highest year-on-year growth.

Passenger vehicles demonstrated a steady performance with an 11% growth in domestic wholesale volumes, driven by consistent demand trends and channel filling. Maruti Suzuki and Tata Motors reported positive numbers in this segment.

On the other hand, commercial vehicles experienced a soft performance, with domestic volumes declining slightly year-on-year. Tata Motors and Ashok Leyland faced declines in their commercial vehicle segments.

Tractor sales faced a weak show, with an estimated 18% year-on-year decline in February, attributed to stress in the agricultural sector in certain regions due to erratic and deficient monsoons.

Despite the mixed performance across segments, analysts remain confident in the two-wheeler and passenger vehicle space, anticipating positive sales performance moving forward. The upcoming wedding and festival seasons, coupled with increased government pre-election spending, are expected to contribute to strong volume trajectories. However, commercial vehicles and tractors may face a muted outlook in the near term.

In the auto sector, Jefferies favors TVS Motor, Eicher Motors, Bajaj Auto, and Tata Motors as their preferred buys.