Sell Bajaj Auto; target of Rs 7267: Prabhudas Lilladher

Prabhudas Lilladher's research report on Bajaj Auto

Bajaj Auto’s 4QFY24 revenue came in at Rs 114.8bn, which is 3.5%/2.2% higher vs PLe/BBGe. EBITDA grew by 34.4% surpassing PLe/BBGe by 5.2%/4.1% respectively while margin (20.1%) expanded by 80bps vs PLe/BBGe 48bps/37bps. Management foresees recovery in exports markets, however, emerging markets like Nigeria and Bangladesh continue to be subdued due to currency devaluation and inflationary pressure. The rise in EV volume suppressed margins, however, it has been able to mitigate some of it through cost cutting initiatives. Going forward, the management expects the domestic 2W market to grow by 7-8% in FY25 with faster growth anticipated in the premium range of motorcycles. With the launch of new pulsar models along with new launches in EV Chetak and e3Ws coupled with aggressive network expansion, we estimate its 2W/3W volume to grow at a CAGR of 9.8%/7.1% over FY24-FY26E. Higher mix of 125+cc, recovery in exports and premiumization trend shall drive ASP and margin profile.

Outlook

Factoring this, we estimate its revenue/EBITDA/PAT to grow at a CAGR of 13.8%/18.4%/15.3% over FY24-FY26E. We maintain ‘Sell’ and revise our target price upwards to Rs 7,267 valuing the company at 20x on its FY26E EPS.