The Indian commercial vehicle market is showing signs of a potential cyclical recovery, with strong sales figures and positive outlooks from major brokerages. This renewed interest in the sector could be a game-changer for investors looking to capitalize on the upswing.
BofA Securities and JP Morgan have initiated coverage on Tata Motors' CV business with 'Buy' and 'Overweight' ratings, respectively. Both firms have set a price target of ₹475, suggesting a potential upside of approximately 23% from current levels. This optimism is based on the company's steady market share, margin discipline, and a robust return on capital employed (RoCE) of over 35% even through a down-cycle.
The bullish brokerage reports are driven by several key factors, including:
Dipan Mehta, Founder Director at Elixir Equities, believes that the CV industry is poised for growth, with Ashok Leyland being his preferred choice. 'Our preference would be for Ashok Leyland, which has been steadily able to increase market share and has a great export potential as well,' he stated. Mehta also pointed to the company's leadership in new launches and reasonable valuations as factors favouring the stock.
Mehta remains very positive on the CV industry as a whole, noting that its strength is a good indicator of broader industrial, manufacturing, and infrastructure activity. He believes that investors could be overweight on both Tata Motors CV and Ashok Leyland, but reiterated his preference for the latter based on its strong track record. Remember, this is just a perspective, not a prediction. It's essential to do your own research and consider your individual financial goals before making any investment decisions.
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