After 45% index fall, UBS does a u-turn, upgrades automakers

Mumbai: Foreign brokerage UBS has turned positive on Indian automotive companies after the 45 per cent decline in the Nifty Auto index.

The brokerage has upgraded Hero MotoCorp, Bajaj Auto, Maruti Suzuki India and Bosch to ‘buy’ from ‘sell’ as it believes solid balance sheets and strong free cash flow generation of these businesses will cause the market to overlook nearterm disruptions, even as FY21 earnings estimates are likely to be lowered sharply.

UBS believes the negative impact of BS-VI norms and a potentially sharp macro-economic slowdown in FY21 are potentially priced in.


Ashok Leyland, Bajaj Auto and Maruti Suzuki India are UBS’ top picks in the auto sector.

However, the brokerage has slashed target prices of most of the auto stocks mainly due to a cut in earnings estimates for FY22.

The brokerage has cut target price on Bajaj Auto to ₹2,750 from ₹2,900. UBS has retained its buy recommendation on Eicher Motors and cut target price to ₹19,000 from ₹23,000.

The brokerage has also cut target multiple on Mahindra & Mahindra’s core business to 8 times EV/ EBITDA on FY22 estimates and increased the discount for the value of listed subsidiaries given the drag from loss-making subsidiaries.