Auto majors to hike vehicle prices - Angel Broking

According to media reports, auto majors like Mahindra and Mahindra (MM) and Bajaj Auto (BJAUT) are planning to increase product prices from October to mitigate the impact of input cost pressures. While MM would be raising the prices of its passenger and commercial vehicles by up to 2% (around Rs. 6,000 to Rs. 20,000/ vehicle) depending upon the model; BJAUT is still contemplating the quantum of the price hike to be undertaken. The price hike by MM comes on the expected lines and follows similar moves by the rival companies (like Hyundai, Maruti Suzuki, Toyota Kirloskar Motor and General Motors) as it aims to offset the impact of adverse currency movement on its margins.

We believe that the proposed price hike may impact company's volume going ahead given that MM has increased prices by ~5% since March 2013. Further, increasing competition in the utility vehicle segment will also impact the overall volumes. As far as BJAUT is concerned, we would wait to hear from the management on the quantum of the price hike; however, we do not see a material impact of the price hike on the company's performance as we believe that good monsoons will lead to strong rural demand going ahead.

We maintain our Buy rating on MM with an SOTP based target price of Rs. 999 and retain our Accumulate rating on BJAUT with a target price of Rs. 2,115.

Source : Equity Bulls

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