Bajaj Auto Stock Price: Buy Bajaj Auto, Target Price Rs 4395: LKP Securities
Bajaj Auto Ltd., incorporated in 2007, is a large capitalization company (having a market capitalization of Rs 110079.55 Crore) operating in the automotive sector.
The main products/revenue segments of Bajaj Auto Ltd. include automotive – 2 and 3 wheelers, export incentives, other operating income, royalty income and scrap for the year ending March 31, 2021.
For the quarter ended 31-03-2022, the company reported a consolidated total revenue of Rs 8263.70 Crore, down -11.80% from last quarter. Total revenue of Rs 9369.31 Crore and down -6.94% from the same quarter last year. Total income of Rs 8879.70. Crore. The company reported a net profit after tax of Rs 1464.11 Crore last quarter.
BAL recorded impressive margin performance in the fourth quarter despite the difficulties faced by the domestic 2W industry. Going forward, the brokerage believes there will be short-term pressure on volumes and margins on semiconductor chip issuance and high RM prices in the first quarter. However, hoping the pandemic remains under control, he expects a strong rebound in new launches and an easing of supply issues. Therefore, in this scenario, 2W demand in domestic markets is expected to increase with the ongoing wedding season in the North, with rural demand coming back into play during a good monsoon and the surge in corporate electric vehicles. With the pandemic becoming less severe in export markets, he expects further strengthening in export numbers, with new Pulsar and Dominar & KTM bike launches excelling in tandem. With higher investments associated with the KTM Husky and Triumph bike (every time it starts) in their factory in Chakan, they will further expand their market and the scope of their portfolio. Robust 3W performance would support margins. With the ultimate demand for personal mobility continuing with 3W’s EV and CNG models, he expects BAL to get their edge. The Chetak scooter should give BAL the edge of re-entering the high-demand electric scooter segment. The improvement in the product and geographical mix, the favorable evolution of currencies and the rise in prices should support margins in the years to come. With a strong balance sheet, solid yield ratios, high dividend payout (₹140/share announced yesterday), high dividend yield of 3.6% for FY22 and zero financial leverage, he believes that the stock looks attractive at 15 times earnings in the 24th year. It maintains a BUY rating on the stock with a higher target price of ₹4,395 (at 17x FY24E earnings) on improving volume and margin expectations.
The promoters held 53.77% of the company’s capital as of March 31, 2022, while the FIIs held 10.49% and the DIIs 13.18%.
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