The automobile industry in India is the world’s fourth largest with India being the fourth largest car manufacturer and seventh largest manufacturer of commercial vehicles.

Domestic automobile sales increased at ~7% CAGR between FY13-19 with 30.92 million vehicles manufactured in FY2019. In value terms, the Indian automotive industry (including auto-component manufacturing) is likely to reach Rs. 16-18 trillion by 2026.

The government aims to develop India as a global manufacturing as well as a research and development (R&D) hub. Also, the government has also set up an ambitious target of having only electric vehicles being sold in the country.

Following are the companies in the sector that look promising from a long-term perspective –

1. Maruti Suzuki India Ltd

Market Cap₹2,02,348 Cr
EPS(TTM)₹253.21
Book Value₹1,408.88
Face Value₹5.00
Industry P/E8.72
P/E25.67
P/B4.75
Div. Yield1.2%

Maruti Suzuki India Limited (MSIL), formerly known as Maruti Udyog Ltd, is an automobile manufacturer in India. The company is a subsidiary of the Japanese company – Suzuki Motor Corporation.

Should You Consider Buying This Stock?

MSIL is currently the number 1 manufacturer in India and has successful brands to its portfolio including Vitara Brezza, Baleno and Alto K10.

The company is one of the most reputed brands and has remained a household name for decades now. The company’s stock is equally reliable, as its products.

The company plans to launch Ignis hatchback and Baleno RS performance hatchback. The company is also looking to launch Electric Vehicle (EV) in India and is committed to the government’s plan of using EVs in India.

2. Mahindra & Mahindra Ltd

Market Cap₹79,067 Cr
EPS(TTM)₹60.41
Book Value₹294.60
Face Value₹5.00
Industry P/E8.72
P/E9.2
P/B2.16
Div. Yield1.2%

Mahindra and Mahindra Ltd (M&M) is one of the leading multi-national automobile companies in India.

The company is one of the largest vehicle manufacturers by production in India and the largest manufacturer of tractors in the world. It is a part of Mahindra Group, an Indian conglomerate.

Should You Consider Buying This Stock?

M&M has remained one of the favorite picks for investors. The reason has been pretty simple – the homegrown company is one of the largest manufacturers of utility vehicles in India.

The company also has a strong presence in the SUV market through brands such as Scorpio, XUV500, and KUV100. The company is looking to launch Verito EV and Thar Facelift.

This makes the company one of the favorable names. Also, the company has a strong presence in tractors, which is likely to increase going forward owing to rising mechanization in the agricultural industry.

3. Tata Motors Ltd

Market Cap₹55,119 Cr
EPS(TTM)₹-96.35
Book Value₹236.08
Face Value₹2.00
Industry P/E33.8
P/E7.21
P/B0.81
Div. YieldNA

Tata Motors Ltd (TML, formerly TELCO – Tata Engineering and Locomotive Company) is a multinational automotive manufacturing company headquartered in Mumbai.

The company belongs to Tata Group and is forayed in passenger cars, trucks, vans, coaches, buses, construction equipment, and military vehicles.

Should You Consider Buying This Stock?

Tata Group needs no introduction and is the most reputed business house in India and globally.

The company has always remained a bluechip company in the country. The company has unveiled brilliant brands – Tiago, Nexon, Hexa, Tigor, and Kite.

This has helped the company rebrand its position and is likely to have a great future ahead. Also, the company has been benefitting from its JLR brand outside India. These factors make the stock a favorable pick with long-term horizon.

4. SML Isuzu Ltd

Market Cap₹1,135 Cr
EPS(TTM)₹8.60
Book Value₹272.99
Face Value₹10.00
Industry P/E33.8
P/E133.54
P/B2.87
Div. Yield0.2%

SML Isuzu Ltd (SIL) is a commercial vehicle manufacturer established in 1983. The company manufactures and sells buses, ambulances, and customized vehicles. Sumitomo Corporation and Isuzu Motors hold 44% and 15% stake in the company.

8 Consumption Stocks That are Likely to Perform Well in 2019

Should You Consider Buying This Stock? 

The company Isuzu pioneers in diesel engine technology for over ten decades now. The company has been working towards making a strong presence in the domestic passenger car market with its brands like DMax V-Cross.

With the recovery in economic activities, the segments covering school, college, staff, ambulance, etc. has immense growth prospects over the medium term. The company has also invested in capacity expansion, product development, and upgradation of plant infrastructure is likely to support volume growth.

Thus, the stock is expected to perform well if held for a long-term horizon.

5. Amara Raja Batteries

Market Cap
₹10,983 Cr
EPS(TTM)
₹27.75
Book Value
₹190.76
Face Value
₹1.00
Industry P/E
27.65
P/E
23.3
P/B
3.37
Div. Yield
0.7%

Amara Raja Batteries Ltd (ARBL) is the flagship company of the Amara Raja Group. The company is one of the largest manufacturers of lead-acid batteries, which is used for both industrial and automotive applications.

The company’s products are exported to 32 countries across the globe.

Should You Consider Buying This Stock?

Once upon a time, batteries from exide were only used to charge up batteries. Then came Amaron batteries in 2000 that dented the monopoly of Exide.

The batteries grew over time to become official battery providers for Maruti, Tata Motors, General Motors, and Hyundai. The company behind Amazon is none other than Amara Raja. The company has now become one of the favorite name for investors.

ARBL has grown due to the combination of technological innovations (first to introduce maintenance-free, factory charged, extended warranty batteries), witty advertisement and marketing, different distribution channels along with competitive pricing and operational efficiency.

Thus, the company is likely to perform well as it has been doing over the long-term.

6. Wabco India 

Market Cap
₹11,809 Cr
EPS(TTM)
₹162.00
Book Value
₹917.53
Face Value
₹5.00
Industry P/E
24.82
P/E
43.28
P/B
6.79
Div. Yield
0.13%

Wabco India is a subsidiary of the Wabco group, that is a supplier of technology that enhances safety, efficiency, and connectivity of commercial vehicles.

Should You Consider Buying This Stock?

The global braking and air suspension giant formed over fifteen decades ago.

The company, headquartered in Belgium, supplies its products to OEMs like Mahindra and Mahindra, Tata Motors and others. Mahindra, Tata, and other major OEMs.

The company has possessed a debt-free, cash surplus balance sheet and realizes a healthy 20%+ return ratios, thereby providing a reasonable margin of safety.

7. Subros Ltd

Market Cap
₹1,687 Cr
EPS(TTM)
₹9.28
Book Value
₹94.17
Face Value
₹2.00
Industry P/E
24.82
P/E
25.62
P/B
2.75
Div. Yield
0.43%

The company is a significant player when it comes to supplying air conditioner to car manufacturers. The company is formed as a result of an alliance between Denso, Suzuki Motors and Suri Family.

Should You Consider Buying This Stock?

The company started its facility manufacturing only 15000 units in the first year, which has now grown to 1.5 million units in today’s time.

The long-term growth story remains attractive given – (i) new capacity addition, (ii) new product and technology and development, (iii) rising market share, (iv) positive impact of the implementation of BS VI norms and (v) robust pick up in the truck and radiator business.

Lastly, deleveraging of balance sheet along with consistent free cash flow and improving ratios, make the company a favorable scrip.

8. Minda Industries Ltd

Market Cap
₹9,100 Cr
EPS(TTM)
₹13.26
Book Value
₹63.58
Face Value
₹2.00
Industry P/E
24.82
P/E
9.74
P/B
5.46
Div. Yield
0.27%

Minda Industries Ltd (MIL), incepted in 1958, is a leading Tier 1 supplier of automotive solutions to OEMs. The company, headquartered in Manesar, India, has 52 manufacturing plants, design centers, and sourcing offices across the globe.

The company primarily manufactures 2-wheeler switches, handle bar assemblies, sensors, actuators, controllers, 4-wheeler switches, automotive lamps and horns, batteries and the likes.

Should You Consider Buying This Stock?

The company is an indirect play on expanding the automobile sector in India. The company has a diversified product portfolio with over 20 different products and comes with a steady stream of revenue from various products such as lighting, acoustics, etc. and is well positioned to benefit from the changing regulatory environment in the industry along with rising penetration of electronics in vehicles.

MIL has recently announced 2W alloy wheel project at an outlay of Rs. 300 Crore, with a capacity of 3 lakh wheels per month.

The company is likely to benefit due to the rising demand for alloy wheels. Thus, the future looks promising for the company.

9. Jamna Auto Industries Ltd 

Market Cap
₹2,084 Cr
EPS(TTM)
₹3.78
Book Value
₹12.59
Face Value
₹1.00
Industry P/E
24.82
P/E
16.62
P/B
4.15
Div. Yield
1.63%

Jamna Auto Industries Ltd (JAI) is an Indian multi-national company that manufactures automotive suspension spring system.

The company is India’s largest automotive suspension spring manufacturer and is among the top three manufacturers globally.

JAI has eight plants in India that produce products like tapered or multi-leaf spring, parabolic spring, lift axle suspension and air suspension system. The company has a significant presence in the exports market with products sold in over 25 countries.

Should You Consider Buying This Stock?

The company has been witnessing strong growth in sales numbers driven by a gain in market share and a robust increase in CV volume.

The company is likely to see growth faster than the CV industry as the parabolic products and others such as lift axle and lift suspension are likely to gain momentum in the coming years.

The share of these products are likely to improve moving forward, thereby helping in cushioning the profitability levels. The company is also focused towards increasing its reach in the high margin export business to reduce its dependency on domestic OEMs and to reduce its exposure to the cyclical CV business.

Thus, the company remains a favorable pick at the current price for long-term horizon.

10. Automotive Axles Ltd

Market Cap
₹1,640 Cr
EPS(TTM)
₹79.33
Book Value
₹337.31
Face Value
₹10.00
Industry P/E
24.82
P/E
19.54
P/B
3.22
Div. Yield
1.24%

Automotive Axles Limited (AAL), established in 1981, is a joint venture between Kalyani Group and Meritor Inc., USA. The company has its manufacturing facilities located in Karnataka and Jharkhand.

The company is engaged in the manufacturing of drive axles, non-drive axles, front steer axles, specialty & defense axles, and drum & disc brakes.

AAL market distributes its product in both, domestic and international market with trucks and buses manufacturers being its key clients.

Should You Consider Buying This Stock?

Although the CV industry is facing short term headwinds like liquidity crunch, rising interest rates, and fuel costs, the long-term demand looks intact owing to the implementation of the BS VI norms, and scrappage policy.

The company is a market leader in the axles business and is well positioned in gaining incremental business from its clientele in the event any of the regulations are materialized.

Thus, the strong growth in topline, healthy margins, healthy return ratios, clean balance sheet, and attractive growth potential coupled with capacity expansion makes the company a favorite pick for long-term.

Happy Investing!

Disclaimer: The views expressed in this post are that of the author and not those of Groww