Auto Stocks Outlook
for the week – 21 to 25.07.2014
Stocks of major automobile
manufacturers are seen tracking the broader indices during
the coming week, in the absence of
either any sector-specific triggers or Apr-Jun
earnings of any company. India's
largest carmaker Maruti Suzuki India Ltd is expected to
detail its earnings for the quarter
ended June on Jul 30.
Maruti Suzuki is seen reporting a
12.3% on-year rise in its Apr-Jun net profit to 7.1 bln
rupees, aided by higher vehicle sales
and cost cutting measures undertaken by the
company. The country's largest
passenger vehicle manufacturer reporting a 13.1% onyear
rise in its Apr-Jun net sales to
113.06 bln rupees.
While volume growth is likely to
record a slow recovery in the upcoming quarters based
on low base and improving sentiments,
we favour companies with strong margin levers,
a better medium-term volume growth
outlook and reasonable valuations. The stock is
seen trading with a minor positive
bias during the week, with consolidation likely during
the latter half. Bajaj Auto Ltd, which
posted its earnings for the quarter Thursday,
reported net profit of 7.4 bln rupees
in Apr-Jun, up 0.3% on year, sharply below Street
expectations. The automaker's net
sales during the reporting quarter stood at 51.3 bln
rupees, up 6.8% from the
corresponding period a year ago.
Bajaj Auto was expected to report a
13% increase in net profit at 8.3 bln rupees, and an
8% rise in net sales at 52.1 bln
rupees. As a consequence, we see Bajaj Auto's counter
under pressure throughout the coming
week, and chose it as an underperformer among
auto stocks.
