Hero MotoCorp, Bajaj Auto shares tumble 3% as UBS warns of festive season impact

In morning trading on September 30, shares of leading two-wheeler manufacturers experienced a dip of up to 3%. This decline was influenced by global brokerage UBS, which anticipates that the early festive season combined with the inauspicious period of ‘Shradh Paksha’—running from September 17 to October 2—will negatively affect sales.

Hero MotoCorp struggles in market share

Hero MotoCorp emerged as the worst performer on the Nifty Auto index after UBS reiterated its 'sell' recommendation, indicating that the company is losing market share to its competitors. This has resulted in Hero MotoCorp dropping to the second spot in the domestic two-wheeler market, currently holding a 23.2% market share.

While UBS maintains a 'buy' rating for both TVS Motor and Eicher Motors, it has a 'sell' stance on Hero MotoCorp and Bajaj Auto. The brokerage pointed out significant discounts available on e-commerce platforms within the two-wheeler segment, a trend expected to continue through the festive season. Notably, the entry price for electric two-wheelers is now significantly lower than that of the most popular internal combustion engine (ICE) motorcycles and scooters. According to UBS, TVS is gaining market share, while Hero MotoCorp is losing its competitive edge.

Currently, Hero MotoCorp shares are trading at 26 times projected earnings for FY26, which is over three standard deviations above its five-year historical average.

Bajaj Auto and TVS Motor performance

Shares of Bajaj Auto also declined, trading at ₹12,419, down 2% from the previous close on the NSE. UBS also recommends selling Bajaj Auto. Conversely, TVS Motor Co., which has a 'buy' rating from UBS, saw its shares drop over 3%, trading at ₹2,860.

International brokerage Jefferies projects a growth rate of 10-13% for both Bajaj Auto and TVS while forecasting only 3-6% growth for Hero MotoCorp, Mahindra & Mahindra (M&M), and Maruti Suzuki. Jefferies expects declines of 3-8% for Eicher Motors, Tata Motors, and Ashok Leyland. Among the auto sector, TVS and M&M remain Jefferies' top selections. Both Tata Motors and Ashok Leyland have also declined by over 1%, barring Eicher Motors.

Commercial vehicle market outlook

The commercial vehicle (CV) segment is anticipated to experience negative volume growth due to a high base for cargo vehicles. However, e-way bill generation has exceeded last year's figures, indicating improved freight availability for transporters.

On a positive note, Nuvama predicts that the tractor industry is likely to see positive volume growth, driven by enhanced farmer sentiment resulting from surplus or normal rainfall across many regions in the country.

Key takeaways

• Major two-wheeler shares declined by up to 3% due to market pressures.
• Hero MotoCorp struggles with market share, dropping to 23.2%.
• UBS retains a 'sell' rating on Hero MotoCorp and Bajaj Auto but a 'buy' rating on TVS Motor and Eicher Motors.
• The commercial vehicle sector is expected to see negative growth, but favourable weather conditions may improve tractor sales.
• Investors looking to invest in stocks in the auto sector should consider the varying forecasts across companies.