Bajaj Auto, Hero Moto top bets in 2-wheeler space: Religare

Mihir Jhaveri of Religare Capital Markets prefers betting on the two-wheeler companies over four wheeler players. From that space, he is positive on Bajaj Auto and Hero Moto, he told CNBC-TV18 in an interview. The broking firm has a hold rating on TVS Motor and is the least preferred play.

Also Read: August auto sales continue to disappoint; exports rise Below is the edited transcript of Mihir Jhaveri’s interview with CNBC-TV18 Q: What is your call on Mahindra & Mahindra? A: M&M, the tractor market is doing pretty good, it did 9 percent growth. It is seeing YTD 21-22 percent growth. We expect it to be 12 percent if the run rate continues in single digit. It can head higher as well. Their UV segment is a worry and it is not doing that great. Its UV segment will continue to be under pressure, so it is a mixed bag the company. Q: What is happening with Tata Motors? Anything that you are hearing in particular today and what is resulting in the buoyancy that we have seen as well as your view on the sales number? A: Tata Motors’ domestic market is not doing that great. India’s gross domestic product (GDP) has been downgraded by many broking firms – GDP is under pressure and the medium and heavy commercial vehicles (MHCV) segment is directly related to GDP growth. But Jaguar Land Rover (JLR) is doing pretty good. The buoyancy in the stock has more to do with JLR as their new Range Rover Sport will be coming in and delivery will start soon. So, Tata Motors sales numbers for the coming months would be good as far JLR is concerned. Q: What about the two-wheeler space? Bajaj Auto versus Hero MotoCorp - how did you read the two companies sales numbers? What is your call on both these stocks now? A: We are positive on the two-wheeler space. We preferred two-wheelers over four wheelers. Hero has run up a bit now. Bajaj’s numbers were not that great. Its domestic market motorcycle sales were down 22 percent. Exports have saved them, that segment has done well. In that sense, Bajaj Auto has a margin cushion with the rupee closer to 66-67/USD. It has a margin benefit, which will be there in the coming quarter. That will protect them from volume de-growth. Hero has a very low base now and its volumes were not that exciting this month as well, but it has shown some growth in the coming quarters. Over a year’s time it has increased focus on increasing their margins so, their margins have also bottomed out in the last to last quarter. We believe that the margin should move up from now. Out of the entire pack and in autos we clearly like two-wheelers both Bajaj Auto and Hero MotoCorp. Q: What about TVS Motor? A: Out of the three TVS Motor is the least preferred. We have a hold rating on the stock. The company is not launching any new product. We do not like TVS Motor as such. Our preference will clearly be Bajaj Auto and Hero MotoCorp.