M&M, Maruti Suzuki Top Auto Picks Ahead Of Festive Season For Elara Capital’s Jay Kale

Despite automakers experiencing a muted start to the festive season, demand for passenger vehicles is likely to bounce back, says Jay Kale, executive vice-president, auto and auto ancillaries, Elara Capital.

He has picked Mahindra & Mahindra Ltd. as the preferred stock in the passenger vehicle segment, followed by Maruti Suzuki India Ltd.

Though the demand for passenger vehicles has been on the lower side over the past few months, the festive season could bring a turnaround, Kale told NDTV Profit.

"Things have been relatively muted. We also had Bajaj indicate that the start of the festive season has been muted. However, as we move to the start of the core festive season, things will bounce back and clock double-digit growth. For the moment, as companies push inventory to the dealer, you will see good wholesale growth,” he said.

The real test of the sector in terms of growth would be overall numbers from September to December, Kale said.

Kale placed his bet on Mahindra & Mahindra, highlighting that the company had posted substantial growth despite the passenger vehicle segment struggling as a whole.

"M&M is on track to post a growth rate of 15% to 20% based on their launches. Thar Roxx is coming in. At the same time, their tractors are also holding up; we are expecting a 5% growth in FY25. So, M&M on a core earning perspective is pretty much on track."

Mahindra & Mahindra Ltd. posted a 24% year-on-year jump in its SUV sale at 51,062 units in September 2024. The company's exports rose 25% YoY to 3,027 in the period under review.

Commenting on the upcoming initial public offering of Hyundai, Kale said, "We will have to see at what valuation Hyundai lists, and how the listing gains pan out."

The analyst, however, predicted two-wheeler companies would perform better than passenger vehicle makers, though valuations remained a concern in the segment.

"Overall, for autos, our view is that post-festive season, the segment does underperform the broader market, whereas leading up to the festive season, it outperforms the overall market. But, within auto, if I have to pick, it will be more of the two wheeler," he said.

Kale picked Bajaj and TVS Motor Co. as his preferred stocks within the two-wheeler segment.

Bajaj Auto dispatched 2,59,333 units to its dealership in September 2024 against 2,02,510 units in the year-ago period, marking a 28% year-on-year growth. Exports grew 13% YoY to 1,41,156 for the Pune-based company. Overall, its two-wheeler sales rose 22% annually to 4,00,489 units.

Talking about other key players in the two-wheeler space, Kale highlighted that Ola Electric was struggling with declining numbers as established players ramped up efforts to tap the EV demand.

"Ola has lost market share and market leadership in five of the top 10 states, and that is definitely a cause for concern as the incumbents ramp up their EV distribution network as well as their product pipeline. We will see pressure on the market share of Ola Electric going forward as well," he said.

Shares of Bajaj Auto Ltd. traded 1.87% lower at Rs 12,112.70 apiece on the BSE around 11:15 a.m., while Mahindra & Mahindra Ltd.'s stock gained 1.23% to trade at Rs 3,134.25 apiece. On the other hand, Maruti Suzuki Ltd. shares were trading 1.62% lower at Rs 13,012.75 apiece on the BSE.

Shares of Ola Electric Mobility Ltd. were trading 2.46% higher at Rs 102.15 apiece.