Bajaj Auto an market performer: P Lilladher

Prabhudas Lilladher research has maintained market performer rating on Bajaj Auto with target price of Rs 550 in its July 10, 2008 report. "With the launch of new products, the model mix for the company is expected to shift towards the premium segment, which enjoys higher margins. Management believes that the company would be able to maintain its margins at 13–14% for the remaining part of the year on account of higher exports, changing product mix and increasing contribution from the duty free facility at Pantnagar.   The company is currently attractively valued at 8.5x FY09E EPS of Rs 58.1 and 6.8x FY10E EPS of Rs 73.1. However, in a scenario of lacklustre demand due to stringent lending norms coupled with rising interest rates, manufacturers may not be able to pass on the entire cost push, which would force them to absorb part of the costs. Aggressive discounting by OEMs to push volumes is expected to further put pressure on margins. While the downside risk for the stock is limited, we maintain Market Performer rating considering the negative macro-economic factors" according to Prabhudas Lilladher report.