Buy Bajaj Auto; target of Rs 11,940: LKP Research

LKP Research is bullish on Bajaj Auto has recommended buy rating on the stock with a target price of Rs 11,940 in its research report dated October 17, 2024.

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October 18, 2024 / 09:05 IST

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LKP Research's research report on Bajaj Auto

Bajaj Auto Limited (Bajaj) reported Q2 FY25 topline growth of 20.6% yoy and 10% qoq as volumes in the domestic markets were up by 22% yoy on demand uptick seen in both 3W and 2W industry. During the quarter, domestic motorcycles grew by 26% yoy. The growth was due to success of >125 cc bikes, Triumph expansion, EV 3W and Chetak success. Exports grew steadily by 7% as well on a yoy basis as LATAM grew well and Africa showed slow recovery. Motorcycle exports grew by 5% yoy, while 3W exports grew by 21% yoy. Triumph and Chetak also pulled up a good show in Q2 as Chetak gained market share. EBITDA was up by 24.3% yoy to ₹26.5 bn, while margins moved up to 20.2% bps yoy from 19.8%, and flattish qoq. Margins were up mainly on better cost management, operating leverage, improved product mix, favorable forex and stable commodity costs. All other cost items below operating levels remained more or less range bound, however, bottomline adjusted for an exceptional item of ₹2.11 bn to account for a cumulative one-time impact on deferred tax on investment income due to changes in tax structure was up by 21% yoy.

Outlook

We estimate revenue / EPS CAGR of 19% / 22% over FY24-26E. Maintain BUY with FY26E TP of ₹11,940 (30x PE). Slowdown in domestic 2W market and slower than expected recovery in exports remain key risks to our argument.

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