Emkay Global Financial has given Hold recommendation for Bajaj Auto with a target price of Rs. 4200 in its research report issued on Jul 28, 2022

Emkay Global Financial’s research report on Bajaj Auto

BJAUT’s Q1 EBITDA fell 5% qoq (3-yr CAGR: 3%) to Rs13bn but was 4% above our estimate due to the revenue beat. Though revenue was flat (3-yr CAGR: 1%) at Rs80bn, it also came in 4% above estimates on higher revenues from spares and better model mix. We expect a 7% volume CAGR in FY22-24, which is lower than the 12-13% CAGR for peers such as TVSL and HMCL, mainly due to subdued exports. We expect exports to decline by 2% in FY23, owing to adverse currency movements, high inflation and unfavorable government policies in Africa and the Middle East. We expect domestic volumes to see an FY22-24 CAGR of 13%, driven by the reopening of offices/educational institutions, better finance availability and favorable base effect. EV sales should improve in subsequent quarters on new products (3Ws, swappable battery vehicles, etc.), improving product availability in more cities and production ramp-up.

Outlook

We increase FY22-25 EPS estimates by 2%, factoring a decline in share capital by ~2% (assuming buy-back at ~Rs3,900/share). Maintain Buy with a TP of Rs4,200 (Rs4,100 earlier), based on 17x Sep’24E Core EPS (Jun’24E earlier), value of investments at Rs178/share and cash reserves of Rs639/share.

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