Hold Bajaj Auto; target of Rs 3300: ICICI Direct

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.

Outlook

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.