Nuvama Institutional Equities expects two wheelers to outperform in the upcoming festive season based on channel checks with dealers.

What The Brokerage Said: Nuvama said the two wheeler segment is expected to have a 15% plus growth in the festive season with robut demand from the rural and positive urban demand.

Rural market share among the two wheeler industry is 55% which will aid the outperformance of mass market players such as TVS Motors, Hero Motocorp and Bajaj Auto compared to premium players like Eicher Motors with Royal Enfield, the brokerage said. 

While the demand for personal vehicles is expected to moderate at single digits, the utility vehicle segment is expected to be in double digit beating hatchbacks performance which will favour Mahindra and Mahindra and Tata Motors against Maruti Suzuki, the brokerage added.

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Top Picks:  For TVS Motor, the brokerage kept a “buy” call and raised the target price to ₹3,200. The brokerage firm said the revision is based on higher volume and margin assumptions.

Nuvama expects a revenue and earnings per share annual growth rate of 12% and 26% over FY24-27. This is based on strong growth prospects due to early stage of ongoing upcycle in two wheelers and TVS's market share gain in domestic, overseas and an aggressive electric vehicle focus.

Nuvama reiterated “buy” call for Hero MotoCorp while increasing the target price to ₹6,500 after considering the higher value of investments in Ather Energy and Hero Fincorp, according to Nuvama.

The research firm predicts a revenue and earnings annual growth rate of 8% and 10% over FY24-FY27 for Hero MotoCorp with healthy free cash flow of ₹4,100 crore and dividend yield of around 3%. 

Price Action: Shares of TVS Motors were down 0.56% to ₹2,739.55 on Wednesday morning.

Shares of Hero Motocorp were down 0.73% to ₹5,628.05.

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