Accumulate Bajaj Auto; target of Rs 4120: Prabhudas Lilladher

Prabhudas Lilladher recommended Accumulate rating on Bajaj Auto with a target price of Rs 4120 in its research report dated April 28, 2022.

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April 30, 2022 / 11:15 AM IST

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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.

Outlook

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.

For all recommendations report, click here