Neutral Bajaj Auto; target of Rs 10,705: Motilal Oswal

Motilal Oswal recommended Neutral rating on Bajaj Auto with a target price of Rs 10,705 in its research report dated September 16, 2024.

Broker Research

September 17, 2024 / 14:32 IST

Neutral

Motilal Oswal's research report on Bajaj Auto

We met with the management of Bajaj Auto (BJAUT) to get an update on the different segments of the business. The management anticipates a 7-8% volume growth in the domestic 2W industry in FY25E as it expects growth to moderate in H2 due to a high base YoY. In exports, the strong demand in Latin America and ASEAN is being offset by the continued slowdown in Africa and Bangladesh, and the management expects exports to post a single-digit growth in FY25E. Amongst the positives are: 1) Freedom 125cc is experiencing strong demand, prompting the management to aim for a production increase to 40k units per month by Jan’25; additionally, the management plans to launch another CNG bike by FY25 end; 2) Chetak is performing well and is now ranking third in the market; the management aims to capture the second spot led by forthcoming new launches; and 3) the 3W EVs segment is experiencing significant growth. Amongst the negatives to be monitored are: 1) weakness in the KTM performance, and 2) likely margin pressure given the adverse mix. Reiterate our Neutral rating on the stock.

Outlook

At 39x/31x FY25/FY26E consolidated EPS, the stock’s valuation fairly reflects the positives from here on. We reiterate our Neutral rating with a revised TP of INR10,705 as we roll forward to Sep-26E consolidated EPS (valued at 25x Sept 2026 EPS).

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