Brokerage firm Emkay Global has upgraded shares of Bajaj Auto Ltd., the manufacturer of two- and three-wheeler vehicles, citing improved export prospects and strong performance in the electric two-wheeler (E-2W) segment.

The brokerage upgraded Bajaj Auto to ‘Add’ from its earlier rating of ‘Sell’. It has a price target of ₹9,500 on the stock, which implies a potential upside of 10% from the stock’s current levels.

However, Emkay’s price target is well below Bajaj Auto’ recent peak of ₹12,774. The stock has declined over 30% from those levels.

The brokerage has also upgraded shares of TVS Motor Company Ltd. to ‘Buy’ from its earlier rating of ‘Add’, and revised its price target to ₹2,800 amid continued bottom-up growth and market share gains and margin expansion levers.

Emkay has retained its ‘Buy’ rating on Hero Motocorp Ltd., with a price target of ₹

5,600 per share, amid attractive risk-reward at 13 times. The stock is down 33% from its recent peak. The brokerage has also maintain a ‘Buy’ rating on Eicher Motors Ltd. on renewed growth focus and potential recovery in exports.

“While we acknowledge the slowing growth momentum in the domestic two-wheeler industry, with an 8% year-on-year growth in Vahan retail registrations during the Sept-Dec 2024E festive period compared to 12.6% year-on-year during Apr-Aug 2024, the steep correction of 24% in two-wheeler stocks from the recent peak (with the sharpest declines of 33% and 30% for Hero MotoCorp and Bajaj Auto, respectively) appears unwarranted,” Emkay wrote in its note.

The brokerage highlighted that the outlook for exports is improving and poised for a sharp recovery, as most of the macroeconomic challenges in highly under-penetrated key African markets like Nigeria have largely subsided, and Latin America is experiencing sustained growth.

Emkay continues to prefer two-wheelers over passenger vehicles due to a relatively better growth outlook (even after factoring in the slowdown) and the strengthening competitive positioning of incumbents in the EV segment.

As many as 13 out of the 15 constituents of the Nifty Auto index are down in Wednesday’s trading session.

Bajaj is leading the losses on the Nifty Auto index, followed by Eicher, MRF, Maruti, and TVS Motor Company.

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