Hold Bajaj Auto; target of Rs 4130: Prabhudas Lilladher

Prabhudas Lilladher's research report on Bajaj Auto

We marginally increase our FY24/25 EPS estimates by 1-3% to factor in higher ASPs from increase in EV volumes, partially offset by cut in volumes for exports. BJAUT reported better than expected 4Q revenue, while EBITDA margin was largely in line with our above street estimates. Margins expanded helped by significant inventorisation benefit, higher spare mix and better vehicle mix, offset by lower operating leverage. Concerns on the export volumes continue (~50% of sales) with BJAUT delaying the recovery timelines led by uncertainty on unavailability of USD and lower affordability. Also, lack of market share gains in the domestic motorcycles market over the last few years, and increase in competition could lead to further pricing actions.

Outlook

However, we expect BJAUT’s domestic premium segment volumes to grow (similar to the industry) helped by premiumisation trends and fast ramp-up of EVs could make us turn constructive on the stock. Maintain ‘HOLD’ with a target price of Rs 4,130 (Rs 4,020 earlier) at 16x Mar-25E EPS.