ICICI Direct recommended hold rating on Bajaj Auto with a target price of Rs 3210 in its research report dated July 23, 2020.
ICICI Direct's research report on Bajaj Auto
Bajaj Auto (BAL) reported healthy Q1FY21 results. Net revenues came in at Rs 3,079 crore (down 60.3% YoY) tracking higher-than-expected blended ASPs, which were at Rs 69,493/unit (up 6.9% YoY). Total volumes were down 64.5% YoY to 4.4 lakh units (2-W volumes 4.0 lakh units, down 63% YoY; 3-W volumes 43,174 units, down 73.8% YoY). Total exports were at 2.5 lakh units, down 54% YoY. Reported EBITDA margins came in at 13.3% (down 511 bps QoQ) amid gross margin expansion of 130 bps (including impact of forex gains). Consequent reported PAT was down 53.1% YoY at Rs 528 crore. At the consolidated level, share of loss from KTM amounted to Rs 132 crore.
We value BAL at a revised target price of Rs 3,210 using SOTP method (valuing core business at 18x FY22E EPS and assigning 2x P/B on KTM investment). We continue to assign HOLD rating to the stock. We derive comfort from debt free, cash rich B/S, capital efficient business model and robust cash flow generation.
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