Auto Stocks Outlook for the week – 11 to 15.05.2015
Stocks
of major auto makers are seen tracking broader indices over the next week in
absence
of any sector-specific triggers. Quarterly earnings posted by automobile
manufacturers
have been positive so far, but largely below estimates, and hence would
keep
counters of respective companies under pressure.
Hero
MotoCorp Ltd's Jan-Mar net profit fell 14% on year to 4.76 bln rupees, on
account
of a
1.55-bln-rupee loss due to cessation of operations of the auto maker's US-based
partner
Erik Buell Racing. The company declared its Jan-Mar numbers Thursday, and
while
most of the movement has been factored in, the stock would continue to trade in
a
narrow
range.
Erik
Buell Racing ceased operations and filed for bankruptcy in April, but Hero MotoCorp
booked the damages in its Jan-Mar numbers. Tax expenses for Hero MotoCorp in
Jan-Mar rose disproportionately to 2.09 bln rupees from 1.87 bln rupees a year
ago, pulling the company's net profit further down. Net profit fell even though
the company stopped amortising its one-time royalty on products and
technologies to erstwhile partner Honda Motorcycle.
Among
major automobile manufacturers, commercial vehicle maker Ashok Leyland Ltd
is
scheduled to detail its earnings for Jan-Mar on Tuesday. Ashok Leyland is
expected to
report
a standalone net profit of 2.11 bln rupees for the quarter, from a
127-mln-rupee net
loss
a year ago, and its net sales are seen rising 55% to 46.76 bln rupees.
The
recovery in numbers is expected on account of a revival in the medium and heavy
commercial
vehicle segment, and on the company having divested heavily to reduce debt
and
hence the finance costs.
Ashok
Leyland's counter is seen taking positive cues from the earnings, and an
expectation
of a positive trend rests if the numbers are in line with estimates. Some
amount of correction is seen in Bajaj Auto Ltd's counter over the next week
after a 9% rally this week. They, however, added that a short-term outlook on
the stock was positive, on the back of new product initiatives announced by the
company.
