Auto Stocks Outlook for the week - 11 to 15.09.2017

Auto Stocks Outlook for the week - 11 to 15.09.2017

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Auto Stocks Outlook for the week - 11 to 15.09.2017 )

 Seen mixed, festival demand eyed Stocks of automobile companies are likely to remain mixed next week as investors cautiously await the festival season to kick in. Companies usually see strong demand for automobiles with the onset of Navratri, which falls in September-end this year. Automobile companies, including the largest carmaker Maruti Suzuki India Ltd, remain optimistic that post a temporary bump after the implementation of goods and services tax from Jul 1, sales will improve further from September onwards. Steady market share improvement, rising rural contribution, reduced Japanese yen exposure and improving share of premium products have improved Maruti Suzuki's positioning considerably. The company's recent effort to rebrand its mass-selling non-premium showrooms under the ARENA brand will further strengthen its best-selling portfolio of Swift hatchback, mini cars such as Alto K10 and WagonR. The company plans to set up over 80 Maruti Suzuki ARENA showrooms by March. We expect commercial vehicle companies such as Tata Motors Ltd and Ashok Leyland Ltd to witness recovery in medium and heavy commercial vehicle segment over the next few months with pick-up in economic activity and pent-up demand. Ashok Leyland posted a 25% on-year rise in its sales in August, while commercial vehicle sales of Tata Motors rose 34% on year to 31,566 units. Ashok Leyland recently said that it plans to increase its focus on light commercial vehicles and launch one product in the segment every quarter. However, investors are keeping an eye on the recent strike by 4,000 temporary workers of Tata Motors at its Jamshedpur plant against alleged non-payment of revised wages. Among two-wheelers, Hero MotoCorp remains the 'top pick' of most investors given expected slew of launches, good monsoon and strong network. Being present in vast rural markets, the company is likely to be the main beneficiary of an uptick in rural economy owing to good monsoon. Model-wise, the company is performing well on the scooters side off late. On the 100-125 cc motorcycle segments through Splendor and Glamour, Hero is strengthening its position.

Source : Cogencis Information Services Ltd.