Buy Bajaj Auto; target of Rs 10,263: KR Choksey

KR Choksey's research report on Bajaj Auto

For Q4FY24, BJAUT’s operating performance was slightly better than estimated as Revenue/ EBITDA/ PBT before share of associates were 3.9%/ 3.7%/ 3.1% higher than estimated, respectively. This was on account of better-than-estimated average realization per vehicle. However, the reported PAT was 8.3% lower than our estimate due to the lower share of profit of associates and a higher-than-estimated tax rate. As a result, growth in PAT (+18.0% YoY) was lower than the growth in EBITDA (+37.8% YoY). Overall, BJAUT continued to deliver a strong performance in the quarter, backed by double-digit volume growth in domestic and exports (export growth on a low base), continued improvement in realization and continued YoY improvement in EBITDA margin. The Board of Directors have approved a dividend of INR 80 per share for FY24. This dividend plus the recently concluded buyback leads to an overall payout of 95.0%+ of the FY24 PAT to shareholders.

Outlook

We retain our FY25E EPS estimate but increase it for FY26E by 4.7% as we believe EBITDA margins can inch up after the current resiliency. Due to the continued performance strength and multiple growth levers in place, we assign a higher P/E multiple of 27.8x on FY26E EPS of INR 369.2 and arrive at a target price of INR 10,263/share. Accordingly, we maintain our “BUY” recommendation on the shares of Bajaj Auto.