UBS has downgraded Maruti Suzuki and Bharat Forge due to weak demand outlook and macro uncertainty. However, Mahindra & Mahindra and TVS Motor remain top picks, thanks to strong growth fundamentals and better resilience.
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UBS Auto Sector Outlook: Downgrades and Top Picks
Global investment firm UBS has released its latest assessment of India’s auto sector. The report reflects shifting investor sentiment, with Maruti Suzuki and Bharat Forge facing downgrades, while Mahindra & Mahindra (M&M), TVS Motor, and a few others have emerged as promising bets.
Maruti Suzuki, Bharat Forge Downgraded
UBS has downgraded Maruti Suzuki from “Buy” to “Neutral”, citing concerns over slowing small car sales and increasing competitive pressure. Despite being a market leader in passenger vehicles, Maruti faces headwinds from changing consumer preferences and rising competition in the compact and mid-size segments.
Bharat Forge has been downgraded from “Buy” to “Sell”. UBS points to weakness in the global commercial vehicle cycle and macroeconomic uncertainties affecting its non-defense portfolio. Although the company holds a strong position in the forging segment, current global conditions are expected to dampen growth in the short term.
M&M and TVS Motor Remain UBS Favorites
Mahindra & Mahindra continues to be a top pick for UBS, supported by strong demand in both the passenger vehicle and tractor segments. The company’s robust product portfolio and strong order books are contributing to consistent performance. M&M’s utility vehicle sales and rural penetration remain key growth drivers.
TVS Motor Company also received a positive nod, thanks to its superior EBITDA performance and consistent market share gains in the two-wheeler segment. UBS noted TVS’s operational efficiency and strategic focus on premium models and EVs as key strengths.
Other companies mentioned favorably include Hyundai Motor India and Ashok Leyland, both of which are viewed as well-positioned to navigate sector challenges.
UBS View on the Auto Sector
UBS expects margin pressures across the auto industry due to:
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Softening demand in key segments
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Increased competition
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High input costs
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Inventory adjustments post-festive season
OEMs like Tata Motors and Hero MotoCorp are also expected to face margin compression, while component suppliers such as Apollo Tyres and Bharat Forge are under watch due to external risks.
Key Takeaways for Investors
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Shifting Focus: Investors may reconsider exposure to Maruti and Bharat Forge in favor of M&M and TVS Motor.
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Growth Outlook: Companies with rural demand strength and diversified product lines are likely to outperform.
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Sector Trends: Margin pressure and global uncertainty remain key themes in the near term.
