Rupee spike positive for auto part makers, says Credit Suisse

Credit Suisse initiates coverage of India’s auto components makers and says the sector offers “a structural positive story and a large higher margin replacement market.”

“Given low penetration levels of most vehicle segments and that income levels in India should continue to grow over the next few years, most segments of the auto industry are expected to see a 10-15 percent CAGR over the medium term,” Credit Suisse said in a report.

India’s top car makers with high import need are looking to increase locally-sourced parts as a weak rupee increases the cost of overseas components.

Credit Suisse rates Exide Industries with an ‘outperform’ rating, with a target price of Rs 159. Sees strong cyclical growth in the next two years in the higher-margin replacement segment. Exide shares last up 0.6 percent at Rs 128.95.

The financial services firm rated Bosch with ‘outperform’ and a target price of Rs 10,292. It also added that as the leader in diesel engine components, stands to benefit from the increased volumes of diesel vehicles. Bosch shares were down 0.3 percent at Rs 8,858.05.

But Credit Suisse rated Apollo Tyres as “underperform” and a target price of Rs 77 as a shift towards radial tyres, or tube-less tires, would entail that the company would need to increase capacity via capital spending. Apollo share fell 1.8 percent to Rs 81.90.

Reuters