LKP Research is bullish on Bajaj Auto has recommended buy rating on the stock with a target price of Rs 3055 in its research report dated May 21, 2020.
LKP Research's research report on Bajaj Auto
Bajaj Auto posted a strong set of numbers in Q4 FY20, as a volume fall 0f 17% yoy was quite arrested by a 10.1% hike in realizations on a better product mix and benign hike in input costs. The topline fell by 8% yoy and 11% qoq. Better realizations, steady forex benefits, RM costs tailwinds led to an 8 quarter high EBITDA margins at 18.4% up from 15.7%/17.9% yoy and qoq respectively. RM costs to sales ratio fell to 70.6% from 74% yoy and 71.8% qoq leading to a robust margin performance. Other income grew by 23%, while depreciation grew by just 4%. On 24% tax rate, net profits zoomed up by 36% yoy to ₹13.1 bn. On a qoq basis, they grew by 4%.
We are expecting even margins to pick up in H2 and FY 22 as the high margin 3W sales also will move up with 2W. FY20 has witnessed a special dividend from BAL and we are not building the same for the next two years in our forecast. In view of a positive H2 FY21 and FY22, we are maintaining our BUY rating on the stock with reduced estimates and target of ₹3,055.
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