Two-wheeler players last on analysts' radar in auto space. What should investors do?

The demand recovery in the two-wheelers segment continues to be muted even though sales showed improvement in the month of February.

Two listed two-wheeler players Hero MotoCorp and TVS Motor beat analysts estimates in domestic sales in February with TVS Motor reporting biggest domestic sales growth at 28%, followed by Bajaj Auto at 25% and Hero MotoCorp at over 15%. The growth in domestic sales was driven by wedding season demand and an easing in shortage of chips.

Overall domestic two-wheeler sales grew in double digits from a year earlier. However, both Bajaj and TVS Motors' total monthly volumes were dragged down by weak exports.


Uncertainty in key export markets like Nigeria and other African countries also hurt exports. Two-wheeler segment exports declined by 35% year-on-year.

So far this year, Hero MotoCorp has lost about 9.24%, while Bajaj auto is up 3.53% on a year-to-date basis. Meanwhile, TVS Motor has lost 0.79% this year.

What is the outlook?

Most analysts prefer commercial vehicle (CV) and Passenger Vehicle (PV) players to two-wheeler companies and are cautious in outlook for the near-term.

"Due to inflation and a high interest rate regime, the demand is not as strong as it should have been. However, in the domestic market, demand has largely held up but it is a concern in the global markets. We have to be watchful on this space and I think it depends a lot on the monsoon and if it is not going pick-up there will be challenges along the way," said Deven Choksey, managing director, KRChoksey Shares and Securities.

Analysts at LKP Securities say two-wheelers might gain strength on a low base of last year, EV launches and anticipated solid rabi crop output. However, the impact of the expected El Nino needs to be seen on the rural centric segments.

However, the choice of order for LKP Securities is PVs, CVs and 2Ws.

Stocks specifically, within the two-wheeler space, the brokerage is positive on Bajaj Auto as it expects recovery in domestic sales from now and bounce back of exports 3-4 months down the line as dollar scenario improves in Africa.

"We also like Hero Motocorp as we believe it is almost free from the exports weakness and is also led by strong monsoons barring a few eastern states, improvement in rural economy and upcoming EV launches," it said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)