Last updated: April 26, 2023, 2:36 PM IST
Shares of Bajaj Auto fell 1.41 percent to Rs 4,281 today after the company’s net profit fell 2.5 percent year-on-year to Rs 1,433 crore. The company’s revenue for the January-March quarter was Rs 8904.7 crore, an increase of 12 percent over last year, supported by the continued momentum of the domestic business which delivered strong revenue growth on a volume basis.
However, some analysts believe that Bajaj Auto’s underperformance relative to the industry is likely to continue, due to its weak presence in scooters in the domestic market, not to mention its large exposure to overseas markets. Price targets of 16 domestic and foreign brokers suggest up to 16 percent potential upside. A few targets even suggest a drop of up to 7 percent.
Bajaj Auto shares are up nearly 13 percent in the past month and 11 percent in the past year.
Should You Buy, Sell or Hold Bajaj Auto Stock?
HDFC Institutional Equities, which has the lowest target of 16 brokers, said the domestic motorcycle industry continues to see weak demand and noted Bajaj Auto management has led to volume growth of 6-8 percent in the coming quarters.
“We believe that once volumes pick up again, even the current favorable mix will normalize. This, coupled with the slight underrecovery from recent cost inflation, is likely to keep margins under pressure going forward. At 17.6 times FY25E, the stock looks expensive the company said.
Elara Securities expects the recovery in exports to be gradual for Bajaj Auto/ Exports could post a CAGR of 12 percent in FY23-25E, adding that exports in FY25 could still be 10 percent below FY22 peaks.
“Volume reductions are expected to be largely offset by higher ASP and margin, resulting in earnings per share growth of 1-4 percent in FY24E-25E. We believe the catalyst for the share price movement would be a rebound in export volumes (probably gradually) and an increase in Triumph volume,” the company said. It has set the target price at Rs 5,000.
“Bajaj Auto’s underperformance is likely to continue due to its weak presence in scooters in the domestic market, not to mention its large exposure to overseas markets. On balance, we maintain ‘HOLD’ with a price target of Rs 4,400 (previously rs 4,160) based on a 6 percent/5 percent increase in earnings per share in FY24E/25E,” said Nuvama Research analysts.
Domestic brokerage firm Motilal Oswal said: “Both domestic volumes and export volumes are expected to recover from the low base in FY24, fueling a healthy earnings recovery. Brokerage expects the company to benefit from market share gains in the long term, driven by: (1) the trend of premiumization, (2) the export opportunities and (3) the potentially significant position in the scooter market through electric vehicles. However, much of India’s profit pool (from premium motorcycles and 3Ws) is vulnerable to potential disruptions from electrification.”
“At 17.7x/15.9x FY24/FY25 consolidated earnings per share, the valuation of the stock fairly reflects the expected recovery and risk associated with EVs. The company’s dividend yield of 4.5-5 percent should support the stock. It reiterated the ‘neutral’ assessment with a target price of Rs 4,400 (based on 16x Mar ’25 consolidated earnings per share).
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