February 28, 2018 / 5:33 AM / 4 months ago

BUZZ-Morgan Stanley says to avoid Indian auto stocks with EU premium car sector exposure

** Morgan Stanley says to avoid automakers and related component manufacturers that are exposed to European Union premium car market, such as Tata Motors Ltd and Motherson Sumi Systems Ltd

** A top German court ruled on Tuesday in favour of allowing major cities to ban heavily polluting diesel cars, a move that could accelerate a shift away from the combustion engine and force manufacturers to pay to improve exhaust systems

** EU premium original equipment manufacturers (OEMs) generate 65 pct of sales from diesel segment; for Tata Motors’ Jaguar Land Rover (JLR) that number could be more than 75 pct - MS

** MS says EU accounts for about 40 pct of JLR FY18 sales

** A 3.5 pct jump in sales of Jaguar saloons & Land Rover sport utility vehicles helped Tata Motors post a higher profit for Dec qtr

** MS estimates that 16-20 pct of Motherson Sumi’s consolidated profit after tax comes from EU market

** Prefer domestic stocks such as Maruti Suzuki India Ltd , Ashok Leyland Ltd and Mahindra and Mahindra Ltd - MS

** Shares of Ashok Leyland were up 2.1 pct, while Mahindra & Mahindra was down 1 pct

** Tata Motors trades 0.5 pct lower, while Motherson Sumi and Maruti Suzuki were little changed

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