Bajaj Auto share price nears all-time high, should you buy, sell or hold?

Strong volume growth, improved cost control, and increased FX realisation all contributed to Bajaj Auto’s profitability. The company had reported a profit of ₹1,173.30 crore in the year-ago period. Sequentially, consolidated net profit was rose 16% from ₹1,432.88 crore in Q4FY23.

The company’s total revenue from operations rose nearly 29% on year to ₹10,309.77 crores during the quarter ended June from ₹8,004.97 crore in Q1FY23. The company’s EBITDA for the quarter under review was ₹1,954 crore, up 51% year over year, while margins of 19% were up 280 basis points. Sequentially, margins dropped by 30 basis points from 19.3% in Q4FY23.

Rakesh Sharma, executive director of Bajaj Auto, stated that since the company’s two motorcycles were unveiled earlier this month in partnership with the Triumph motorbike brand from the United Kingdom, there have been roughly 17,000 reservations made.

In Q1FY24, the overall number of vehicles sold—including both two-wheelers and commercial vehicles—was 10,27,407 units, up 10% from the 9,33,646 units sold in the same period of FY23.

The stock has gone up roughly 5% after Bajaj Auto introduced the Triumph Speed 400 and Triumph Scrambler 400X on 5 July in collaboration with the British motorcycle manufacturer.

“No major traction since last couple of weeks, 4800 is the lower end of the recent trading range, that coincides with 20EMA as long it holds trend is positive, a break below it only will trigger weakness, on the flip side, 4950 – 5000 is resistance,” said Rajesh Bhosale – Equity Technical and Derivative Analyst, Angel One.

Bajaj Auto Q1 Results: Net profit rises 42% on year to ₹1,664.77 crore

What do brokerages say?

Nuvama Institutional Equities 

According to the brokerage’s analysis, Bajaj Auto reported strong EBITDA for the first quarter of FY24 at ₹19.5 billion, beating expectations by 3%. The brokerage anticipate a reversal with a CAGR of 9% over FY23-25E, driven by ongoing domestic growth and a recovery in exports, following a 9% decline in FY23 volumes. Exports may gradually rebound, depending on the state of the economy and the availability of USD in markets in Africa and Asia.

“We believe the company would underperform peers such as TVS Motors, 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 ₹5,100 (earlier ₹4,880) based on an uptick in FY24E/25E EPS by 6% each, factoring in higher realisations/margins,” said the brokerage.

According to the brokerage’s analysis, Bajaj Auto’s lower EBITDA margin of 19.0% in the first quarter of FY24 was caused by an unfavourable mix as the commuter segment’s share increased during the wedding season. The brokerage expects the EBITDA margin to remain rangebound over the following several quarters despite volume recovery and steady raw material because of a weak mix-driven ramp-up in Chetak volumes and a recovery in exports.

“Both domestic and export volumes are expected to recover in FY24 from the low base, driving healthy earnings recovery. We expect Bajaj Auto to benefit from market share gains over the long term, driven by the premiumisation trend, the opportunity in exports, and the potential sizeable position in the Scooter market via EVs. However, a large part of its India profit pool (comprising premium motorcycles and 3Ws) is vulnerable to possible disruption from electrification. We reiterate our Neutral rating with a target price of ₹5,150,” said the brokerage.

Kotak Institutional Equities

The brokerage stated in its report that Bajaj Auto recorded 1QFY24 EBITDA of Rs19.5 bn, which was 4% below the estimate due to lower-than-expected gross margins caused by an inferior mix.

The brokerage anticipates a slow comeback in the volume growth of the domestic 2W business. Additionally, it expects an increase in export segment volumes qoq; yet, a negative risk still exists due to the uncertainty surrounding the US dollar’s unavailability. As the mix normalises, in its opinion, recent profitability trends are expected to partially reverse.

“We maintain a ‘sell’ on the stock, with a revised fair value of ₹4,350 (from ₹4,275). We value the standalone business at ₹4,127 a piece using the DCF methodology and ascribe ₹221 per share to the stake in the KTM business,” said the brokerage in its report.

Bajaj Auto share price Today Live Updates : Bajaj Auto’s stock soars in today’s trading session

Updated: 26 Jul 2023, 02:30 PM IST