Buy M&M, Bajaj Auto, Ashok Leyland for up to 19% upside, says Choice; check target prices
Brokerage firm Choice Institutional Equities has maintained a positive outlook on the Indian automobile sector following a resilient performance in the second quarter of FY26. The brokerage highlights that demand has strengthened meaningfully, driven by improving rural sentiment, a good monsoon, and a boost in consumption following GST rationalisation.
Betting on this structural recovery, Choice has recommended buying top-tier automobile manufacturers, projecting an upside of up to 19 per cent for select stocks.
Leading the pack is Mahindra & Mahindra (M&M), with the brokerage maintaining a 'Buy' rating and a target price of Rs 4,450, implying an upside of nearly 19 per cent from the current levels. Choice notes that M&M's revenue outperformance is strategically driven by segment mix and pricing power, rather than mere volume expansion. The brokerage highlighted the company's continued execution in its core automotive and farm businesses, where standalone revenue rose 21 per cent year-on-year.
Ashok Leyland also features as a top pick with a 'Buy' rating and a target price of Rs 161. The brokerage cited the commercial vehicle manufacturer’s focus on premium product launches and its ability to consolidate leadership in the domestic MHCV segment. Analysts at Choice expect the upcoming launch of heavy-duty trucks with advanced engines to drive margin-accretive growth for the company.
In the two-wheeler space, Bajaj Auto retains a 'Buy' rating with a target price of Rs 9,975. The report points to the resolution of supply chain issues for the Chetak electric scooter, noting that production normalisation has helped in "restoring its #1 position in Vahan registrations," it said.
Choice remains constructive on the sector for the upcoming quarters. The note emphasises that festive spillover demand through Nov-Dec, improved stock availability, fresh model introductions, year-end retail schemes and new-year registrations are expected to sustain volume growth across categories, Choice said.
The brokerage also observed a revival in the entry-level segment, noting that "GST rate rationalisation" has made vehicles more accessible for first-time buyers. For the commercial vehicle segment, the report projects that GST rate cuts for CVs will act as a catalyst for the pent-up replacement demand of the ageing CV fleet.
While bullish on select OEMs, Choice has adopted a more cautious stance on others. The brokerage has an 'Add' rating on Hero MotoCorp with a target price of Rs 5,710, citing strong market share gains.
However, the firm has issued a 'Reduce' rating for Maruti Suzuki (Target: Rs 15,800), Eicher Motors (Target: Rs 7,020), and TVS Motor Company (Target: Rs 3,400), suggesting limited near-term upside relative to current valuations.
In the ancillary space, Choice remains positive on companies benefitting from premiumisation and technological upgrades.
Lumax Auto Technologies: The brokerage downgraded the rating from 'Buy' to 'Add' due to a recent run-up in the stock price but maintained a target of Rs 1,480. The report highlighted a robust order book of Rs 1,357 crore, which offers strong revenue visibility.
Fiem Industries: Rated as 'Add' with a target price of Rs 2,270.
Lumax Industries: Rated as 'Add' with a target price of Rs 5,175.
Conversely, the brokerage has a 'Reduce' rating on several other ancillary players, including Endurance Technologies (Target: Rs 2,820), Motherson Sumi Wiring (Target: Rs 48), Uno Minda (Target: Rs 1,215), and Suprajit Engineering (Target: Rs 430).
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