Emkay's report on Bajaj Auto
Management believes the product/market mix will ensure sustained high margins and concerns over brand Discover is exaggerated as it forms just ~11% of topline
Strong response to Discover150 should clear its ‘positioning’ and arrest volume decline; launch of Platina self-start and new/faired Pulsar to accentuate growth in these segments
In commercial segment (3w), while mgmt aims to retain its strong turf in permit based markets, it would adopt an offensive mode to gain market share in non-permit markets
Export growth to be driven by cementing leadership in key markets, increasing penetration in existing markets and entry into new markets
We certainly see long term sustained profitability and growth drivers emerging here, but retain HOLD on full valuations
"We believe that the downgrade cycle in Bajaj Auto is over and certainly see long term sustained profitability and growth drivers emerging. However, we broadly retain our FY16/17 earnings estimate post the management meet. The stocks is currently trading at 17.2x/14.8x FY16/FY17E est. We believe that valuations are full leaving little room for upside potential. Retain HOLD with a target price of Rs 2500", says Emkay Global Financial Services research report.
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