Axis Direct, in its Q3FY26 update report, has identified Eicher Motors, Bajaj Auto and Ashok Leyland as its top conviction ideas for 2026, citing expectations of export growth, margin expansion and gains in market share.
The brokerage stated that these companies could deliver steady growth, improved EBITDA and ber market positioning. Eicher Motors and Bajaj Auto have been highlighted from the two-wheeler segment, while Ashok Leyland has been identified from the commercial vehicle segment.
Axis Direct has assigned a ‘Buy’ rating on Eicher Motors with a target price of Rs 8,060. The company, parent of Royal Enfield, has refreshed its product cycle, introducing new variants of Classic, Bullet and Hunter models, resulting in 21 percent volume growth in Q3FY26. The brokerage noted that the company addressed post-GST demand softness through product updates and marketing initiatives.
Hunter 350 has gained traction among younger customers, with increasing contribution from the 23–24 age group. Exports rose 34 percent in the first nine months to 1,04,506 units. The commissioning of a second CKD unit in Brazil has further strengthened its international footprint. Management has stated that its focus remains on volume growth and absolute EBITDA growth rather than margins alone. Standalone EBITDA increased 30 percent in Q3. Axis Direct expects EBITDA CAGR of 15–16 percent between FY25 and FY28.
Bajaj Auto has also been assigned a ‘Buy’ rating with a target price of Rs 10,790. According to Axis Direct, the company is witnessing recovery in international markets. Export volumes in Q3FY26 increased 18 percent to over 6 lakh units, with the monthly run rate crossing 2 lakh units for the first time in 40 months. Market share has increased across the top 30 overseas markets.
The brokerage highlighted record performance in Latin America and expansion in Brazil. In the three-wheeler segment, Bajaj Auto maintained its market share despite industry decline. The company has established leadership in electric three-wheelers and the e-rickshaw segment. Bajaj Auto Credit Limited’s assets under management reached Rs 16,500 crore, with a capital adequacy ratio of approximately 19.8 percent.
In the commercial vehicle segment, Axis Direct has assigned a ‘Buy’ rating on Ashok Leyland with a target price of Rs 225. In Q3FY26, the company outperformed the industry, with domestic medium and heavy commercial vehicle volumes rising 23.4 percent and market share reaching 30.9 percent. Light commercial vehicle volumes increased 30 percent. Market share in North India crossed 25 percent.
Hinduja Leyland Finance reported assets under management of Rs 56,470 crore. The reverse merger process is progressing. The Lucknow plant has commenced operations, and bus body building capacity is being increased to 20,000 units annually. Management indicated that existing capacity is sufficient to support growth over the next two to three years without significant additional capital expenditure.
Axis Direct stated that product premiumisation, improving export markets, a potential uptick in rural demand and possible GST rate relief could support the auto sector. The brokerage emphasised a selective approach, focusing on companies with b balance sheets, diversified product portfolios and defined growth strategies.
The report is based on the views of the brokerage. Investors are advised to consult their financial advisors before making investment decisions.
