ICICI Direct recommended hold rating on Bajaj Auto with a target price of Rs 2840 in its research report dated May 21, 2020.
ICICI Direct's research report on Bajaj Auto
Bajaj Auto (BAL) reported strong results in Q4FY20. Net revenues came in at Rs 6,816 crore (down 7.8% YoY), tracking higher-than-expected blended ASPs, which were at Rs 68,711/unit (up 10.9% YoY). Total volumes were down 16.9% YoY to 9.9 lakh units (2-W volumes 8.5 lakh units, down 14.8% YoY; 3-W volumes 1.4 lakh units, down 27.8% YoY). Total exports were at 5.1 lakh units, up 6.8% YoY. Reported EBITDA margins were at 18.4% (up 48 bps QoQ), with a QoQ improvement driven by 150 bps gross margin expansion. Consequent reported PAT was flattish YoY at Rs 1,310 crore, aided by higher-than-expected other income (Rs 533 crore vs. Rs 432 crore YoY).
For BAL, sales, PAT are expected to grow at 2.1%, -4.1% CAGR, respectively, in FY20P-22E. We slightly raise our target multiple (implied P/E at 17.5x FY22E EPS) on the back of enhanced B/S strength, excellent cash position & healthier return ratios, courtesy better than expected margins. We have a HOLD rating on BAL with SOTP-based target price of Rs 2,840.
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