Analysts turn positive on auto sector; Maruti & M&M top picks

The total domestic auto volumes are expected to grow at a CAGR of 14.1% over FY22-FY24 on the back of a low base, need for personal mobility as well as low penetration levels in the PV segment and a cyclical recovery underway in the CV category, analysts said.
ICICI Direct has shifted its stance to positive, from neutral, for the automobile industry owing to improved availability of semiconductors and chips and a substantial reduction in metal prices, which is a key raw material for the sector.

Owing to new launches, the PV segment is likely to see robust demand prospects, analysts said. The recent cut in excise duty on fuels is another significant factor giving citizens a green signal to own a vehicle.

M&M and Maruti Suzuki are the top bets for the brokerage firm in the auto OEM space while in the ancillary space, its top bets are Automotive Axles and Minda Corporation. The companies have registered a pre-booking worth sales volume of two-six months.

The capital efficiency of these firms is an add-on factor that makes them a top bet in their respective categories.

The auto industry has been facing a crisis for a long time due to supply-chain disruptions, Covid-19 fears, a spike in fuel prices, and a shortage in semiconductor chips.