Hero MotoCorp, Bajaj Auto shares slip 3% as UBS says 'sell' over likely high discounting during festive season

Nuvama notes that the tractor industry is likely to see positive volume growth, driven by improved farmer sentiment

Shares of major two-wheeler manufacturers fell up to 3 percent in morning trade on September 30 led by global brokerage UBS' expectation of impact of the early festive period this time coupled with the inauspicious period – ‘Shradh Paksha’ from September 17–October 2.

As for Hero MotoCorp, the company was the worst performer on the Nifty Auto index after UBS retained its 'sell' call on the counter suggesting that the company is conceding market share to rivals. This decline pushed Hero to the second position in the domestic two-wheeler market, with a 23.2 percent share.

However, UBS has retained its 'buy rating on TVS Motor and Eicher Motors, while maintaining a sell' on Hero MotoCorp and Bajaj Auto. The brokerage highlighted significant discounting in the two-wheeler segment on e-commerce platforms, a trend expected to persist through the festive season. The entry price of electric two-wheelers is notably lower than that of the best-selling ICE motorcycles and scooters. In terms of market dynamics, TVS continues to gain market share, while Hero is losing ground, the brokerage said.

Hero Moto stock is currently trading at 26 times FY26 projected earnings, which is more than three standard deviations above its five-year historical average, says UBS.

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Bajaj Auto shares also traded in the red after trading at Rs 12,419, lower by 2 percent from the last close on the NSE. UBS also has a 'sell' call on the Bajaj Auto counter. Meanwhile, shares of TVS Motor Co, on which UBS has a 'buy' call, slipped over 3 percent to trade at Rs 2,860.

International brokerage Jefferies expects a 10-13 percent growth from Bajaj Auto and TVS, while pencilling in a 3-6 percent growth for Hero MotoCorp, M&M and Maruti Suzuki.

Jefferies forecast a decline of 3-8 percent for Eicher Motors, Tata Motors, and Ashok Leyland. In the auto sector, TVS and Mahindra & Mahindra remain Jefferies' top picks. Barring Eicher Motors, both -- Tata Motors and Ashok Leyland edged lower by over a percent.

The commercial vehicle (CV) industry is expected to see negative volume growth, primarily due to a high base for cargo vehicles. On a positive note, e-way bill generation has surpassed last year's levels, signalling improved freight availability for transporters.

Meanwhile, Nuvama notes that the tractor industry is likely to see positive volume growth, driven by improved farmer sentiment, thanks to surplus or normal rainfall in most regions of the country.

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