ICICI Direct recommended Hold rating on Bajaj Auto with a target price of Rs 3300 in its research report dated October 24, 2019.
ICICI Direct's research report on Bajaj Auto
Bajaj Auto's (BAL) net revenues came in at Rs 7,707 crore (down 3.5% YoY), with blended ASPs at Rs 65,673/unit. Total volumes at 11.7 lakh units were down 12.4% YoY (2-W down 13% to 9.8 lakh units; 3-W volumes down 10.8% to 1.9 lakh units). Total exports were at 5.4 lakh units, up 1.7% YoY, with exports revenue at US$415 million. EBITDA margins improved 113 bps QoQ to 16.6% on the back of 120 bps gross margin expansion. Consequent PAT grew robustly by 21.7% YoY to Rs 1,402 crore, aided by adoption of new corporate tax rate (25.2%) and a tax reversal of Rs 182 crore.
For BAL, sales and PAT are expected to grow at 8.0% & 8.2% CAGR, respectively, in FY19-21E. We value BAL at Rs 3,300 using SOTP method (implied P/E at 17.5x FY21E EPS) and assign a HOLD rating to the stock.
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