Buy Bajaj Auto; target of Rs 3484: KR Choksey

KR Choksey's research report on Bajaj Auto

In Q4FY19, Bajaj Auto reported total revenue from operations of INR 7,395 Cr, a growth of 9% YoY (down 0.2% QoQ) slightly above our estimates of INR 7,221 Cr. Volumes increased 14% YoY (down 5% QoQ). EBITDA margin contracted by 370 bps YoY to 16% (+12 bps QoQ) indicating margin pressures due to increase in cost of materials consumed. EBIT decreased by 10% YoY to INR 1,101 Cr (+0.7% QoQ) and EBIT margins expanded by 15 bps sequentially. Overall, Net Profit increased by 30.4% YoY to INR 1,408 Cr (+27.8% QoQ) with NPM at 19.5% (+428 bps QoQ/+326 bps YoY). The Board of Directors recommended a dividend of INR 60 per share for FY19.

Outlook

We apply a P/E multiple of 17.4x on FY21E EPS of INR 200 to arrive at a target price of INR 3,484 per share; an upside potential of 15.9%. Accordingly we rate the shares of Bajaj Auto a “Buy”.