Hold Bajaj Auto; target of Rs 9984: Prabhudas Lilladher

Prabhudas Lilladher's research report on Bajaj Auto

We met with the management of Bajaj Auto wherein the management gave a detailed overview of its 2W/3W/EV businesses. The management expects African volume to continue to be under pressure due to currency devaluation; however, the absence of African volume has been offset by a better mix in its international volume. Its Triumph launch has been well received in the US and UK, its key markets. The management aims to gradually scale up the production of Triumph to ~10k units/month (currently at ~6k units/month). The company launched E-3W in Q3FY24 in certain markets, where it has become one of the leading players aided by its strong brand value. Additionally, E-3W profitability is on par with ICE powertrain, while the path towards profitability for E-scooters will be gradual. BJAUT remains optimistic on its growth prospects, which will be led by a robust product portfolio for domestic and international markets. We foresee healthy demand from rural and urban markets driven by new launches across categories and strong presence in the 125+cc space. Positive demand momentum coupled with network expansion in E-3W/2W shall further aid in volume expansion. Factoring this, we estimate its revenue/EBITDA/APAT to grow at a CAGR of 13.8%/18.4%/16.7% over FY24- FY26E.

Outlook

Given the high growth rate in E-scooters/3W, market share expansion and consistent mix improvement, we change our rating from ‘Sell’ to ‘Hold’ and revise our target price upwards to Rs9,984 valuing the company at 27x (20x earlier), factoring in the high growth rate in the EV and premium segments.