November auto sales show YoY rise in volume; brokerages name 8 stocks to look at

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26 Aug, 2025 12:21

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On expected lines, most automakers witnessed a rise in monthly volume on a year-on-year (YoY) basis for the month of November even though volume declined on a month-on-month basis.

As the festival period is over, it was expected that the demand will ease on monthly basis.

A significant pick-up in demand was seen for commercial vehicles (CV) while passenger vehicles (PV), two-wheelers (2W) and tractors also did well.

Ashutosh Tiwari, Head of Research at Equirus Securities pointed out there was an element of pent-up demand as sales were lower in Q1FY21, but the shift towards personal mobility was also a reason behind demand pick up.

"Sales also benefited from increased savings of service class and government employees as there were limited avenues for spending since the COVID outbreak. Lower finance cost is also helping demand," Tiwari said.

As the economy is improving and the vaccine for COVID-19 looks near, is the road for automakers going to be smooth now?

Brokerages and analysts expect volumes to improve in the coming quarters on strong rural sentiment, low-interest rates, improving finance availability and a gradual pick-up in the business and economic activity.

"We believe that post the festive season, the inventory for passenger car OEMs is below the average 30-day levels, which has led to the growth. Over the rest of the year, we expect sales trends to be better than what was earlier expected as the economy is gradually normalising," said Aditya Makharia, Institutional Research Analyst (Auto), HDFC Securities.

However, the road for all segments is not going to be the same.

"Festive season sales were reasonable, with no major negative surprise. Current demand and low inventory sentiment in PV and tractor suggest higher wholesales in the coming months. On the flip side, 2W and CV OEMs are expected to maintain a cautious stance, with no major inventory push," said brokerage firm Motilal Oswal Financial Services.

"Valuations reflect for recovery to sustain in the coming quarters, leaving a limited margin for safety for any negative surprises. Hence, we prefer companies with: a) higher visibility in terms of demand recovery, b) a strong competitive positioning, c) margin drivers, and d) balance sheet strength," Motilal Oswal added.

Tiwari of Equirus Securities believes there is likely to be a sluggish period over the next 2-3 months due to seasonal weakness post festivals, but he expects demand to pick up again from March-April 2021 as rural demand will pick up post-harvest and with COVID cases subsiding even earnings of business class people will revive.

Brokerage firm ICICI Securities pointed out that the rising incentive schemes across segments post-festive season, lack of price increase even in wake of higher input costs correlate with the fragility of the consumer sentiment.

"We believe channel inventory clearance remains a key priority for December; thus, expect incentives to increase further by the end of Q3," ICICI Securities said.

Pankaj Bobade, Head - Fundamental Research, Axis Securities is of the view with the festive season now over in India, the auto industry volumes to moderate in Q4FY21 as the pent-up demand is tapering down and fresh demand has to kick in to sustain the growth.

"Generally, the December month witnesses tepid growth at the retail level, as the end-users await the vehicle with chassis plate of the new year. Hence, the short-term (2 months) outlook would be relatively soft compared to the festive season but we expect the auto industry to post a strong double-digit recovery over FY22 and FY23 on the back of improving fundamentals, a low base of FY20 and FY21 and recovery in the other sectors of the economy," Bobade said.

Rusmik Oza, Executive Vice President and Head of Fundamental Research-PCG at Kotak Securities has a cautious view on the automobile sector as stock prices have rallied smartly on the back of better results and healthy volume growth.

"We expect net profits of the automobiles sector to increase 11 percent in FY21 despite very low volumes in Q1FY21 (affected by the nation-wide lockdown in the months of April and May 2020)," Oza said.

For the medium-term, Oza expects the motorcycle industry to grow at 12-20 percent in FY22-23 after a sharp decline in FY21. He expects the domestic car industry to grow by 14-22 percent during FY22-23E after a sharp decline in FY21.

"We expect a moderate decline in FY21E EBITDA margins of the OEMs given lower volumes that will result in negative operating leverage and higher costs related to the implementation of new fuel emission standards (BS-VI fuel standards applicable from April 1, 2020. We expect EBITDA margin to improve in FY22 on the back of higher volumes (positive operating leverage)," Oza said.

Mitul Shah, Head of Research at Reliance Securities believes that demand for automobiles would remain healthy over the medium to long-term, though the pace of growth may taper down.

"We may see some slowdown over near-term due to post-festival effect, while FY22 would be strong for the sector with healthy double-digit growth," Shah said.

Stocks to focus

Global financial firm Morgan Stanley expects all segments of the auto sector to recover sharply in 2021.

It expects growth to taper off in Q3 and rebound sharply in Q4.

"Maruti Suzuki, Mahindra & Mahindra, Bajaj Auto & Eicher Motors remain our preferred overweights. Motherson remains a top pick among suppliers," Morgan Stanley said.

Brokerage firm CLSA highlighted that the volume recovery continued but lower than the peak in October.

CLSA said it prefers deep cyclical plays such as Tata Motors and Ashok Leyland.

Brokerage firm Emkay Global Securities said its top picks are Maruti Suzuki (Target price: Rs 8,216), Hero Motocorp (Target price: Rs 3,839) and Eicher Motors (Target price: Rs 3,025).

Brokerage firm Motilal Oswal said Mahindra & Mahindra and Hero MotoCorp are its top OEM picks.

Axis Securities likes Hero Motorcorp and Bajaj Auto in the two-wheeler space and expects Maruti to do well in the PV Segment. It expects Ashok Leyland to outperform as it is well-positioned to benefit from the cyclical upturn in the CV industry.

Brokerage firm Prabhudas Lilladher likes Mahindra & Mahindra, Ashok Leyland, Maruti and Motherson Sumi.

Reliance Securities prefers Ashok Leyland and Escorts within automobile space.

Basudeb Banerjee, Research Analyst, Ambit Capital said his top picks in the OEM space are TVS Motors and Eicher Motors (Royal Enfield).

"Premiumisation of two-wheelers is a long-term phenomenon and Royal Enfield will be the biggest beneficiary of that sustainably," he said.

Disclaimer: The views and investment tips expressed by investment experts 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.