Shares of Bajaj Auto fell 3 percent after the company reported weak two-wheeler sales for June. Bajaj Auto’s domestic sales of two-wheelers fell 20 percent year-on-year to 125,083 units in June, despite the month being partially impacted by the second wave of the COVID-19 pandemic a year ago.
Total two-wheeler sales grew 2 percent year-on-year (year-on-year) to 315,948 units, primarily due to a 23 percent year-over-year export increase to 190,865 units during the month. However, domestic sales of two-wheelers fell 20 percent year-on-year to 125,083 units.
One of the other reasons for the weak demand at Bajaj was the fact that it recently discontinued its CT100. So the cheapest model available today is not from Bajaj Auto, but from a competitor. This move hurt BAL’s sales in the 100cc segment, where it previously sold good numbers in rural areas, according to HDFC Securities.
Analysts had expected the company to report about 321,000 sales volumes in June. The market expected the sale of two-wheelers to recover due to good harvests from the rabi season.
As the demand for motorcycles increases, Bajaj Auto dealers seem to be one of the hardest hit due to massive supply constraints. Most dealers got about 25-30 percent of their needs on models from 125cc and above. With Bajaj Auto contributing 53 percent of the total mix in this segment, it is the industry’s hardest-hit car, the brokerage said in its auto sector update.
Stock price history
Bajaj Auto shares plunged 2.81 percent to Rs 3,601.65 against the previous close of Rs 3,705.65 on BSE. The large cap stock is trading above 200-day moving averages but below 5-day, 20-day, 50-day and 100-day moving averages. In total, 0.12 lakh shares of the company changed hands, representing a turnover of Rs 4.28 crore on the BSE. Bajaj Auto’s market cap dropped to Rs 1.04 lakh crore.
The large cap stock hit a 52-week high of Rs 4,250 on July 1, 2021 and a 52-week low of Rs 3,028.35 on December 20, 2021. The stock lost 13.88 percent in one year and gained 11.42 percent. this year.
What do analysts say?
BofA Securities said the downgrade for Bajaj Auto is due to a deteriorating export outlook, with the macroeconomically challenging in key export markets (particularly Nigeria). The brokerage expects Bajaj Auto’s export volumes to fall in FY23 against street expectations of 8-10 percent growth. It sees lower earnings per share (EPS) of 4-6 percent for F23/24, estimated as lower volume assumptions of 7-8 percent.
Earlier this week, Religare Broking bought Bajaj Auto with a target price of Rs 4290. The current market price of Bajaj Auto Ltd. is Rs 3880.6. The time period specified by the analyst is Intra Day when the price of Bajaj Auto Ltd. can achieve a specific goal.
On June 27, the company announced a share buyback worth Rs 2,500 crore. The repurchase represents 9.61 percent of the total paid-up share capital. The company said the board has approved the share buyback at a price not exceeding Rs 4,600.
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