Hold Bajaj Auto; target of Rs 3133: Arihant Capital

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Arihant Capital 's research report on Bajaj Auto

Bajaj Auto Limited ( BAL) revenue from operations declined by 7.2% YoY but increased by 132% QoQ to Rs 71559 mn as CV volumes failed to pick up, while 2-wheeler sales saw an uptick by the quarter end. Domestic Volumes declined by 9%YoY at 573,586 units whereas Export volume declined by 20% YoY at 479,751. in Q2FY21. EBIDTA for Q2FY21 remained flat on YoY basis, however grew by 210% Q0Q at Rs 12,662 mn in Q2FY21 EBIDTA margin expanded by 111 bps YoY & 443 bps Q0Q to 17.7% helped by lower costs of production and lower other expenses. PAT declined 18.8% YoY but increased 115.6% to Rs 11,382 mn in Q2FY21 tracking lower other income and low effective tax rate in base quarteri.e. Q2FY20.

Outlook

At CMP of Rs 2,916 Bajaj Auto currently trades at FY20 PE of 17.2x. We value Bajaj Auto at PE of 16.5x to its FY22E EPS of Rs 185, +80 for KTM stock valuation to arrive at a target price of Rs 3133 using SOTP method for Bajaj’s stake in KTM.

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