Top Auto Stocks to Buy As Semiconductor Shortage Eases in July

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Auto Sales July 2022: After a seemingly never-ending lull in India’s auto segment, a key barometer of the economy, showed positive trends in July, signaling that companies have mitigated the production hurdle caused by semiconductor shortage. But industry executives warned that this improvement could be impacted by any hike in interest rates and commodity price inflation.

Auto majors like Maruti Suzuki, Tata Motors, Hyundai Motors, and Mahindra & Mahindra posted robust sales numbers for the month of July. At 3,24,650 units, the total car sales saw a year-on-year increase of 15.2 per cent in July 2022 as against 2,81,576 units sold during the same period in 2021.

Last Week, Tata Motors Group, chief financial officer, PB Balaji said that the semiconductor shortage issue is easing and he expects it to improve further with every passing month.

Experts have opined that the numbers indicate an upward trajectory which could further get a boost in the festive season when carmakers would expect to register more sales. Even amid fears of recession, lingering inflation, and other unforeseen national and international events, the uptick comes as a glimmer of hope for the auto industry which was desperately looking for a win, they stated.

Punit Patni, equity research analyst, Swastika Investmart Ltd., said: “The July 2022 auto sales have been positive as the semiconductor shortage is easing out and the covid effects have subsided. We are positive about the sector from a long-term perspective; however, the recent China-Taiwan tussle could lead to the resurgence of semiconductor-related issues and dent the recovery in the sector. Further, the recent run-up in the Auto stocks makes us cautious regarding the sector in the near term.”

Stocks To Buy

Post robust monthly auto sales numbers in July, Vikram Kasat- head advisory, Prabhudas Lilladher Pvt Ltd, recommends buying the below-mentioned stocks-

Ashok Leyland

Target Price – Rs 177

Market Share gains aided by new launches, going ahead AL will continue to regain its lost share on the back model launches and revival in the bus segment.

Mahindra & Mahindra

Target Price – Rs 1,400

Record bookings for Scorpio-N, Healthy turnaround in its auto segment through back-to-back successful launches in the highly competitive SUV space and its proactiveness to leverage the EV trend can lead to value unlocking

Maruti

Target Price – Rs 9,500

Performance improvement from 2QFY23, New Brezza, and Grand Vitara along with further model launches will add incremental volumes also margin improvement on the back of Yen depreciation & commodity cost softening

Whereas, Patni said: “Our long-term picks are  Tata Motors Ltd,  Mahindra and Mahindra Ltd, TVS Motor Company Ltd, and Ashok Leyland Ltd.”

The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

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