Prabhudas Lilladher's research report on Bajaj Auto
Bajaj Auto’s 4QFY22 EBITDA margin surprised positively at 17.1% (+190bps QoQ, PLe: 14.9%) driven by 1) deferral of raw material cost (RM cost at 71.9% of sales vs 74.7% QoQ), 2) positive impact of price increase, 3) improved USD realization in exports and 4) favorable sales mix. Deferred RM cost will cause an impact of 3.5-4% in 1QFY23, against which ~1.5% price hike taken in Apr22. We remain positive on BJAUT’s growth prospects as (1) domestic 2W volumes are expected to grow in near-term led by marriage season, opening up of colleges and offices (however genuine demand needs to be monitored post Jun-22), (2) exports demand will likely remain steady and (3) 3W volumes (+28% in FY22) to pick-up momentum post opening up of the economy and increasing CNG demand. Considering near-term risks like commodity cost inflation and chip shortage, we trim our margin estimates by 90/60bps for FY23/24.
Maintain ‘ACCUMULATE’, with a revised TP of Rs 4,120 at 17x FY24E EPS (earlier 16x) on improving domestic outlook for 2Ws and 3Ws, along with increasing volumes of EVs.
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