Emkay Global Financial has given Hold recommendation for Bajaj Auto with a target price of Rs. 4100 in its research report issued on Oct 15, 2022
Emkay Global Financial’s research report on Bajaj Auto
Q2FY23 EBITDA for Bajaj Auto grew 26% YoY to Rs17.6bn, clocking 6% above our estimate due to the revenue beat and lower-than-expected employee expenses. Revenue increased by 16% to Rs102bn, coming in 4% above our estimates on better geographical-mix in exports and higher incentives (both, production & export incentives). Going forward, we expect a 5% volume CAGR over FY22-25 (which is lower than the 8-11% CAGR for peers such as TVSL and HMCL), mainly due to higher exposure to overseas markets. Exports is likely to be under pressure in the near term, with decline of 15% in FY23, owing to adverse currency movements, high inflation and unfavorable government policies in the Africa/Middle East regions. In contrast, we expect domestic volumes to grow at 13% in FY23, driven by strong urban demand, better finance availability and favorable base effect. We increase FY22-25 EPS estimates by 2-4%, factoring-in an improvement in realizations.
Outlook
We maintain HOLD on the stock, with TP of Rs4,100/sh (Rs4,000 earlier), based on 17x Dec-24E Core EPS (Sep-24E earlier), value of investments at Rs155/sh and cash reserves of Rs614/sh.