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BW Businessworld

Credit Suisse Positive On Auto Parts Makers

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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 per cent CAGR over the medium term," Credit Suisse says in the note.

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 initiates Exide Industries with an 'outperform' rating, with a target price of 159 rupees. Sees strong cyclical growth in the next two years in the higher-margin replacement segment. Exide shares last up 0.6 per cent at 128.95 rupees.

Initiates coverage on Bosch with 'outperform' and a target price of 10,292 rupees. Adds that as the leader in diesel engine components, stands to benefit from the increased volumes of diesel vehicles. Bosch shares last down 0.3 per cent at 8,858.05 rupees.

But Credit Suisse starts Apollo Tyres with an "underperform" and a target price of 77 rupees as a shift towards radial tyres, or tube-less tires, would entail the company would need to increase capacity via capital spending. Apollo share fall 1.8 per cent to 81.90 rupees.