Two-wheeler stocks ready to roll on pick-up in mobility

A pick-up in rural demand supported by a fall in input costs is likely to drive strong volume growth for domestic two-wheeler companies in the second half of FY23, analysts believe.

The trend in demand has already been visible in the month gone by, which hinted at a likely thriving environment ahead.

According to industry body SIAM, the wholesale numbers for two-wheelers rose 23% YoY to 1.3 million units in June, while at the retail level, it grew 20.6% from a year ago.  

From the pack, scooter sales jumped 70% to 4,20,000 units, while those of motorcycles climbed 9% to 8,40,000 units. 

Gaurang Shah, Head Investment Strategist, Geojit Financial Services sats recovery in rural markets to buoy demand for two-wheelers, expect healthy sales momentum in two-wheelers MoM and bullish on TVS Motor, Hero Moto and Eicher Motors.

As per IIFL Securities, the recent correction in metal prices is likely to lift earnings-per-share upgrades for two-wheeler OEM manufacturers such as M&M and Bajaj Auto.

On the bourses, shares of two-wheeler companies have firmly defied overall weakness in the market this year. Shares of Hero Moto, TVS Motor, Eicher Motors, Bajaj Auto have surged between 8% to 32% so far in 2022 as compared to over 9% fall in the frontline Nifty and Sensex indices.

That said, as governments push for automotive electrification, analysts believe Hero MotoCorp and Bajaj Auto are primed to benefit from a transition to electric two-wheelers from internal combustion engine (ICE) two-wheelers.

Vinit Bolinjkar, Head of Research, Ventura Securities, says Hero Moto is the best play on EV two-wheelers. Bajaj Auto’s EV ramp up a positive, he says adding that listed two-wheelers will soon catch up with new entrants.

As regards today, crude oil prices, FII flows and rupee movement will guide the market sentiment. Besides, L&T Tech, JSPL, Oberoi Realty, and Federal Bank will be on the radar ahead of their June quarter results.