Nuvama has identified Mahindra & Mahindra, TVS Motor, Motherson Wiring, Uno Minda, and Apollo Tyres as stocks with b potential in the auto sector.
The domestic auto sector is abuzz with market activity, with sales forecasts for June 2025. Leading brokerage firm Nuvama Institutional Equities has included certain specific companies in its top pick list in its latest report on the auto sector. According to the report, the two-wheeler and tractor segments are expected to perform better this time, while there is a possibility of weakness in the figures for passenger vehicles and commercial vehicles.
According to the brokerage's report, increased demand in rural areas, the onset of the monsoon, and the wedding season have supported the sales of the two-wheeler and tractor segments. On the other hand, sales in the passenger vehicles segment may be affected due to weak consumer sentiment and delayed purchases at dealerships.
Expectations of a surge in the two-wheeler segment
The brokerage believes that the sales of two-wheelers in June could increase by approximately 7 percent year-on-year. The demand for bikes and scooters, especially in rural markets, remains b. Exports are also providing support, with Latin America and African markets being major contributors.
According to the report, TVS Motor's sales could reach 410,000 units, with a growth of 23 percent. Royal Enfield (Eicher Motors) is expected to see a growth of 15 percent, which could be around 84,000 units in June. Hero MotoCorp's sales could reach 550,000 units with a growth of 9 percent, and Bajaj Auto's sales could reach 390,000 units.
Tractor segment may show strength
The good start to the monsoon and positive sentiments related to agriculture have supported tractor sales. Mahindra & Mahindra's farm unit sales are estimated to increase by 7 percent, which could be around 50,800 units. Escorts' sales may also see a slight increase, reaching around 11,500 units.
Sluggishness seen in passenger vehicles
The brokerage has projected a decline of up to 5 percent in the passenger vehicles segment. Customer inquiries are down, and delays in purchases are being observed. Despite increasing discounts, there hasn't been a significant impact on sales.
However, Mahindra & Mahindra's sales may show strength in this segment, with an estimated growth of 12 percent, reaching 78,000 units. This includes three-wheelers and commercial units. Hyundai's sales may shrink to 61,000 units with a 6 percent decline. Maruti Suzuki's sales may decrease to 171,000 units, and Tata Motors' sales could reach 41,600 units, representing a 5 percent decline.
Pressure in commercial vehicles as well
A decline in the sales of commercial vehicles can also be seen in June. Nuvama estimates a decline of approximately 4 percent in this segment. The pre-buying before the implementation of AC norms and sufficient fleet availability may affect June sales.
VE Commercial Vehicles (Eicher) is expected to see a slight increase of 2 percent in sales, with 7,600 units. While Ashok Leyland's sales are estimated to remain stable at 14,900 units. Tata Motors' commercial vehicle sales could decline by 2 percent, reaching 31,400 units.
Top picks of the brokerage
Mahindra & Mahindra, TVS Motor, Motherson Wiring, Uno Minda, and Apollo Tyres are among the stocks that Nuvama's report has identified as top picks. The brokerage believes that between fiscal years 2025 and 2027, the SUV, tractor, and two-wheeler segments may record high single-digit growth, which will perform better compared to commercial vehicles.
Companies like TVS Motor and M&M are getting significant support from the rural market. The demand for auto component manufacturers like Uno Minda and Motherson Wiring is also directly linked to OEM production. Tire companies like Apollo Tyres are likely to benefit from the b sales of tractors and two-wheelers.
