Auto Stocks: Expectations for the auto sector have increased with the second-quarter results. Overall revenue and industry volume growth have been better than expected. At the same time, there are also indications of this from the volume trend, there will be a good recovery in the auto sector in the coming days. Volume growth in tractor and private vehicle segment may continue in double digits. The EBITDA margin is also expected to improve. Experts are looking forward to the good days of the auto sector. Brokerage house MK Global Finance says that the current trends are with the auto sector and this sector will also benefit from the improvement in other economies and lower interest rates. MK Global has advised investment in Ashok Leyland, Maruti Suzuki, Eicher Motors and BHFC.
Recovery in volume
According to brokerage house MK Global, the aggregated revenue of the auto sector has been as expected. Growth is now seen in tractors, private vehicles and two wheelers. There is recovery in volume. However, there is still pressure on the commercial vehicle segment. Talking about auto ancillaries, companies making batteries and tires have started getting demand.
Companies reduced expenses
The best thing has been seen that in the second quarter, operating margin increased by 120 points on an annual basis. Companies have insisted on reducing expenses, expenditure on advertisements has come down, logistic cast and other expenses have also come down. Management commentary has been giving hope. He has been seen positive on the volume outlook. In some segments, the volume may increase to double digit.
Good days will come due to these reasons
The brokerage house believes that growth in the auto sector may be better in the coming quarter. Rural sentiments are strong, interest rates are at lower levels, finance availability has been better than before. As the economy is on track, the business activity of companies is increasing. Wholesale is expected to grow in the second quarter of FY 2021.
Investment advice in these stocks
Target: Rs 115
Target: Rs 601
Target: Rs 8216
Target: Rs 3025
(Advice: MK Global Financial Services)