Jefferies Advocates Two-Wheeler Stocks as Earnings Gap Between Two-Wheelers and Four-Wheelers Widens.

Jefferies has reiterated its bullish stance on India’s automobile sector, particularly favoring two-wheeler manufacturers such as TVS Motor Company and Eicher Motors due to their strong performance metrics. The brokerage has noted a significant divergence in profitability between two-wheelers and passenger vehicles, as evidenced by a remarkable 26% year-on-year growth in sales volumes and a corresponding 39% increase in earnings before interest and taxes (EBIT) for the two-wheeler segment. In contrast, despite a 25% rise in sales across major passenger vehicle manufacturers, EBIT contracted by 15% year-on-year, highlighting ongoing margin pressures and competitiveness in this sector.

The financial landscape sees a stark contrast in earnings revisions, with two-wheeler earnings per share (EPS) estimates for FY27 increased by an average of 4%, while four-wheeler projections have been reduced by approximately 6% as consensus estimates adjust to the realities of operational performance. Consequently, stock performance throughout the year has reflected this operational disparity, with two-wheeler shares achieving steady gains, unlike the underperformance exhibited by major four-wheeler manufacturers such as Tata Motors and Maruti Suzuki. Jefferies forecasts a continued cyclical demand recovery for two-wheelers, though commodity price volatility remains a noted risk.

Source: The Economic Times

(Expert Note: This intelligence brief was structured and verified by the Wealthova editorial desk.)