Accumulate Bajaj Auto; target of Rs 4756: KR Choksey

KR Choksey's research report on Bajaj Auto

For Q4FY23, Bajaj Auto reported Operating revenue of INR 89,292 mn (+12.0% YoY/ -4.2% QoQ). The underlying volumes for Q4FY23 were lower by 12.0% YoY/ 12.6% QoQ. ASP increased by 27.3% YoY/ 9.5% QoQ. Despite the YoY drop in volumes, revenue growth was supported by favourable FX realization, judicious price hikes, and a better product mix. Consolidated EBITDA was INR 16,572 mn (+21.8% YoY/ -5.7% QoQ). EBITDA margin improved by 150 bps YoY but declined by 30 bps QoQ to 18.6%. Bajaj Auto has started reporting Share of associates only on a half-yearly basis, leading to non-comparability of Net Profit on a QoQ and YoY basis. Reported PAT for Q4FY23 was INR 17,047 mn (+11.7% YoY/ +15.8% QoQ). Adjusting for exceptional items, Adj. PAT growth was 40.8% YoY/ 15.8% QoQ, which is still influenced by the difference in reporting of share of associates. For FY23, Adj. PAT was INR 60,602 mn, which is a growth of 13.3% YoY.

Outlook

We assign a P/E multiple of 17.0x on FY25E EPS of INR 279.8 to arrive at a target price of INR 4,756/share (INR 4,564/share previously); implying an upside potential of 8.2% from the CMP. Considering the uncertainty of the timing of exports recovery, possible stagnancy of margins, and the run-up in share price, we reduce our recommendation to “ACCUMULATE” from the “BUY” rating on the shares of Bajaj Auto.