HDFC Securities' research report on Bajaj Auto
Bajaj Auto’s Q4 PAT at INR14.3bn came in ahead of our estimate of Rs13.2bn, led by better-than-expected margins. Margin beat was largely driven by higher spares and a better-than-expected export mix (sharp decline in African exports). Management indicated that although retail demand in key export markets is likely to have bottomed out, the lack of availability of USD for trade remains the major factor hampering export visibility. The domestic motorcycle industry continues to see demand weakness and management is now guiding for 6-8% volume growth over next few quarters for the industry. Also, we believe that once volumes revive, even the current favorable mix will normalize. This coupled with the slight under-recovery of the recent cost inflation is likely to keep margins under pressure from here on.
Outlook
At 17.6x FY25E, the stock appears expensive. Reiterate Reduce with revised TP of INR 4,028 (earlier INR 3,857); as we roll forward to FY25 earnings (from Sep 24 earlier)—core business valued at an unchanged 16x multiple.
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