Hold Bajaj Auto; target of Rs 11,859: Prabhudas Lilladher

Prabhudas Lilladher's research report on Bajaj Auto

BJAUT standalone revenue in Q2FY25 grew by 21.8% YoY, driven by strong volume growth of 15.8% YoY, while mix improvement (125cc+) in domestic and international motorcycle businesses further aided topline growth as ASP increased by 5.1% YoY. EBITDA grew by 24.3% YoY with margin expanding a moderate 40bps YoY to 20.2%. Rise in key input cost during the initial period of the quarter and scale-up of EV business slightly impacted the margin profile, which was partially offset by marginal price hike in Q2FY25. Further, one-off tax expenses suppressed decent overall performance, leading to a moderate PAT growth of 9.2% YoY. BJAUT continues to deliver healthy growth in its premium products with 125cc and higher end motorcycles contributing to ~75% of its volume. While Nigeria and key African markets continue to de-grow in terms of volume, it is witnessing healthy traction in LATAM and emerging markets. Additionally, the scale-up in EV business and new launches along with PLI benefits shall help the company deliver positive EBITDA in the next few quarters.

Outlook

Factoring this, we forecast its revenue/EBITDA/EPS to grow at a CAGR of 13.7%/15.7%/15.8% over FY24-FY27E. We maintain our “Hold” rating and revise our target price upwards to Rs11,859 (previous Rs11,146), valuing the company at 30x on its Sep-FY27E EPS.

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