Edelweiss' is bullish on Bajaj Corp has recommended hold rating on the stock with a target price of Rs 429 in its research report dated July 12, 2017.
Edelweiss' research report on Bajaj Corp
Bajaj Corp reported in line Q1FY18 revenue (down 3.4% YoY), EBITDA (down 14.5% YoY) and PAT (up 5.3% YoY). Volumes although was strong for April & May (up 6% YoY for ADHO) but remained subdued for the quarter owing to destocking impact, as envisaged, and imbalance in the trade channel in June—overall volume fell 7.8% YoY coupled with 6.7% dip in ADHO volumes and 33.8% decline in Nomarks’ volumes. Gross margin contracted 40bps owing to stock out of older inventory purchased at benign prices and >30% surge in LLP prices YoY. GST implementation, improvement in rural sales, success of Nomarks’ new strategy and monsoon remain key monitorables. Maintain ‘HOLD’.
We estimate 5-7% EPS CAGR over FY17-19 coupled with ~300bps RoAE improvement. The stock is currently trading at P/E of 24.8x FY19E. We maintain ‘HOLD/SU’ with target price of INR429.
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