Shares of Bajaj Auto tanked 1.41 per cent to Rs 4,281 today after the company’s net profit fell 2.5 per cent on-year to Rs 1433 crore. The company’s revenue for the January-March quarter stood at Rs 8904.7 crore, up 12 per cent on-year, supported by the sustained momentum of the domestic business that delivered strong volume-led revenue growth.
However, a few analysts believe Bajaj Auto’s underperformance vis-à-vis industry is likely to persist, owing 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 brokerages suggest up to 16 per cent potential upside on the counter. A few targets even suggest up to 7 per cent downside.
Bajaj Auto shares have risen nearly 13 per cent in the past one month and 11 per cent in the last one year.
Should you buy, sell or hold Bajaj Auto shares?
HDFC Institutional Equities, which has the lowest target among 16 brokerages, said the domestic motorcycle industry continues to see demand weakness and noted that the Bajaj Auto management has guided for 6-8 per cent industry volume growth over next few quarters .
“We believe that once volumes revive, even the current favourable mix will normalise. This coupled with the slight under-recovery of the recent cost inflation is likely to keep margins under pressure from here on. At 17.6 times FY25E, the stock appears expensive,” it said.
Elara Securities expects exports recovery to be gradual for Bajaj Auto/ Exports may post a 12 per cent CAGR in FY23-25E, it said adding that FY25 exports may still be 10 per cent below FY22 peaks.
“Volume cuts are set to be largely offset by increased ASP and margin, resulting in 1-4 per cent EPS rise in FY24E-25E. We believe the catalyst for stock price movement would be export volumes revival (likely to be gradual) and Triumph volume ramp-up,” it said. It has set the target price at Rs 5,000.
“Bajaj Auto’s underperformance is likely to persist owing to its weak presence in scooters in the domestic market, not to mention its large exposure to overseas markets. On balance, we retain ‘HOLD’ with a target price of Rs 4,400 (earlier rs 4,160) based on an uptick in FY24E/25E EPS by 6 per cent/5 per cent,” said analysts at Nuvama Research.
Domestic brokerage firm, Motilal Oswal has said: “Both domestic and export volumes are expected to recover in FY24 from the low base, driving healthy earnings recovery. Brokerage firm expect company to benefit from market share gains over the long term, driven by: (1) the premiumisation trend, (2) the opportunity in exports, and (3) the potential sizeable position in the Scooter market through EVs. However, a large part of its India profit pool (of premium motorcycle and 3Ws) is vulnerable to possible disruption from electrification.”
“At 17.7x/15.9x FY24/FY25 consolidated EPS, the stock’s valuation fairly reflects the expected recovery as well as the risk of EVs. The company’s dividend yield of 4.5-5 per cent should support the stock. It reiterated the ‘neutral’ rating with a target price of Rs 4,400 (based on 16x Mar’25 consolidated EPS).”
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