Tata Motors a top pick in auto space: FinQuest Securities

In the passenger car segment, most players had benefited from the pre-ponement of car purchases in Mar'12. But post Mar'12 sales, passenger car volumes have been sluggish with only UVs and MPVs gaining traction at the expense of passenger cars. M&M has been the main gainer from this spurt with even Maruti also gaining from the success of its Ertiga MPV. Sales are expected to be sluggish with growth coming from diesel variants for most passenger vehicle players (unless tax on diesel cars is levied by the Govt.). Growth is expected to pick-up only in H2FY12 as festive season kicks in. On the CV front, a fall in truck rentals affected sales of CV in May'12. Market leaders TML & ALL bore the brunt of this while smaller players like VECV & M&M gained some share. Even though LCV market continues to be good, driven by market leader TML, whose Magic Iris and Ace Zip models have been selling well.

Going ahead, growth in the CV market is expected to be moderate compared to the robust growth witnessed in FY12 while LCV's are expected to post good growth going ahead. Slowdown in the domestic 2W market and the lack of new models from BAL and TVS resulted in lacklusture performance from them while the market leader HMC continued its good run outperforming in the domestic market due its traction from its newly launched scooter "Maestro". BAL is expected to benefit going ahead in Jun'12 due to the phased launch of its Pulsar 200NS motorbike.

Our Picks:
In spite of the sluggish numbers posted by BAL we continue to be bullish on the stock mainly on account of its superior technology and new launches in the executive commuter (Discover 125ST) and premium category (KTM Duke 200 & new Pulsar 200NS) combined with the market leader position in the high margin premium motorcycle category. Even though there might be short term pain due to slowing sales, momentum is expected to be back from the new launches. We reiterate Buy rating on the stock with a target price of Rs 1919. We might witness some tempering in growth in the passenger vehicle space till the festive season kicks in. Even though TML's performance in the Passenger vehicle and the CV market has nothing to write about the continued strength in JLR's volumes is expected to drive the overall sales of the company. We reiterate our Buy rating on Tata Motors with a target price of Rs 300.

Non-Institutions holding more than 90% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.