ICICI Securities has given Hold recommendation for Bajaj Auto with a target price of Rs. 3575 in its research report issued on Mar 31, 2022

ICICI Securities research report on Bajaj Auto

Since its Q3FY22 result, Bajaj Auto (BJAUT) has outperformed NIFTY50 by ~15% amid worsening outlook on profitability, rising fuel prices and flattish demand outlook in key export markets. Though we keep our FY23E revenue estimates largely unchanged, we trim FY23E EBITDA margin by ~300bps to ~14.5% due to surge in RM costs, resulting in 2% cut in FY24E earnings. Though recent cost inflation would get partially reflected in Q4FY22, bulk of it would come Q1FY23E onward. We continue to build-in 12% domestic motorcycle volume CAGR in FY22E-FY24E with market share at 18.5%. With key 2W overseas markets either showing static demand or a declining bias, we expect BJAUT’s 2W export volumes to grow at 8% CAGR in FY22-FY24E. Cost of key input commodities like steel, aluminum and plastic/polymer has increased by 15-40% QoQ and blended RM/unit in Q3FY22 was at ~Rs57k. A ~15% increase in RM basket cost would require a price hike of ~Rs9k/unit, to keep gross profit/unit neutral.

Outlook

We downgrade the stock to HOLD from Add, with an unchanged DCF based target price of Rs3,575, implying 15.5x FY24E core earnings, Rs785/share cash and Rs130/share value of stake in KTM entity.

More Info

At 14:20 hrs Bajaj Auto was quoting at Rs 3,712.75, up Rs 60.25, or 1.65 percent.

It has touched an intraday high of Rs 3,721.00 and an intraday low of Rs 3,647.55.

It was trading with volumes of 4,860 shares, compared to its thirty day average of 12,614 shares, a decrease of -61.47 percent.

In the previous trading session, the share closed down 0.59 percent or Rs 21.85 at Rs 3,652.50.

The share touched its 52-week high Rs 4,347.95 and 52-week low Rs 3,028.35 on 01 June, 2021 and 20 December, 2021, respectively.

Currently, it is trading 14.61 percent below its 52-week high and 22.6 percent above its 52-week low.

Market capitalisation stands at Rs 107,434.74 crore.

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