Edelweiss Securities is bullish on Bajaj Auto has recommended Hold rating on the stock with a target price of Rs 3399 in its research report dated February 5, 2018.
Edelweiss Securities' research report on Bajaj Auto
Bajaj Auto’s (BJAUT) Q3FY18 EBITDA, at INR12bn (up 18 YoY), came 7% below estimate due to commodity cost pressure. Domestic two-wheeler volume outlook remains positive driven by market share gains; however, we estimate subdued growth in three wheelers post a strong FY18 driven by new permits. Exports outlook is improving with traction in new/nascent markets as well as volume recovery in Nigeria (already clocked peak retail sales of ~35K).
OutlookWe estimate volume/EPS CAGR of 11%/14% over FY18-20. Despite weak volumes in the past two years, BJAUT has clocked ~20% margin, ~25% RoE and strong FCF. Key potential stock triggers are faster uptick in export markets and recently launched Discover gaining acceptance in domestic market. We maintain ‘HOLD/SU’ with TP of INR3,399. At CMP, the stock trades at 19.1x and 16.7x FY19E and FY20E EPS, respectively.
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