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Hold Bajaj Auto; target of Rs 4120: Prabhudas Lilladher

Prabhudas Lilladher recommended hold rating on Bajaj Auto with a target price of Rs 4120 in its research report dated July 27, 2022.

July 28, 2022 / 08:14 PM IST
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Prabhudas Lilladher's research report on Bajaj Auto

Bajaj Auto’s 1QFY23 EBITDA margin surprised positively at 16.2% (-90bps QoQ, PLe: 15.9%) and came slightly above industry expectations. This was driven by increase in average realizations by 5% QoQ to Rs 85.7k/units on the back of higher share of exports in the mix (62% of overall volumes vs 58% in FY22), multiple pricing actions across geographies and higher USD realizations (Rs 77.4 vs Rs 75.5). Company highlighted that the quarter was impacted by semiconductor shortage; however, this situation has improved and new sources are developed. We downgrade Bajaj Auto to ‘HOLD’ as there remains some concern on the export side of the business which could lead to near-term volume pressure. As the company, currently has higher exposure to export markets, there are challenges in terms of rising inflation, global recession, currency devaluation and higher interest rates. Also, 3W demand still remains weak. However, domestic 2W segment has witnessed some recovery on the back of marriage season, opening up of colleges and offices.


We expect this trend to continue. As the semiconductor issue is now easing out, Bajaj will be working on filling the channel inventories ahead of the festive season to meet demand. We now factor in lower volume growth of 7/11% for FY23/24E (vs 11/9% earlier). HOLD with a target price of Rs 4,120 (at 17x FY24E EPS). We see limited upside for the stock.

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Bajaj Auto - 270722 - prabhu

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first published: Jul 28, 2022 08:14 pm
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