Buy Bajaj Auto; target of Rs 4483: KR Choksey

KR Choksey's research report on Bajaj Auto

For Q2FY23, BJAUT reported net operating income of INR 1,02,027 mn, growth of 16.4% YoY and 27.5% QoQ. The total volumes for Q2FY23 increased by 0.6% YoY and 23.3% QoQ. Volumes improved due to improvement in semiconductor supplies. EBITDA for Q2FY23 was at INR 17,496 mn, grew by 25.0% YoY/ 36.0% QoQ. EBITDA margin improved by 117 bps YoY and 108 bps QoQ to 17.1% for the quarter. Margin expansion was aided by judicious price increases, cost management and better FX realization. Net Profit for the quarter was at INR 17,194 mn, down 15.7% YoY/ up by 47.8% QoQ. Net Profit is not comparable on a YoY and QoQ basis due to exceptional items in Q2FY22 and half-yearly accounting of share of profit of associates. Excluding exceptional items, the Adj. Net Profit grew by 11.8% YoY/ 47.8% QoQ.

Outlook

We assign a P/E multiple of 17.6x (18.0x earlier) on FY24E EPS of INR 254.3 (INR 249.1 earlier) to arrive at a target price of INR 4,483/share (unchanged); implying an upside potential of 23.5% from the CMP. Accordingly, we upgrade our rating to “BUY” from “ACCUMULATE” earlier, on the shares of Bajaj Auto.

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