Neutral Bajaj Auto; target of Rs 4211: Motilal Oswal

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Motilal Oswal's research report on Bajaj Auto

BJAUT’s FY21 annual report highlights its resilient performance in a year impacted by the COVID-19 outbreak, led by continuous premiumization and focus on R&D. Its focus on exports and on Premium Motorcycles helped it to outperform the 2W industry in a tough year. Contribution of exports to net sales grew 480bp to 46.8% in FY21. While its share in the domestic Motorcycle market declined marginally (50bp) to 18%, largely led by market share loss of 770bp in the Sports segment due to cannibalization by Pulsar 125cc. It expects to further strengthen its position in the Premium segment, with upper-end Pulsars, KTMs, Dominars, Husqvarnas, and the soon to be launched Triumphs. -Chetak is expected to be launched in additional cities in FY22, and would anchor BJAUT’s foray into the electric mobility space after seeing disruptions in FY21. In the domestic 3W segment, it lost ~670bp market share to 50.6%, due to the sharp impact of COVID-19 in its area of strength: urban 3Ws. It improved its market share in both Goods Carriers (+670bp to 33.7%) and the Diesel Passenger segment (+12.7pp to 41.7%), in turn gaining leadership in all segments of 3Ws. It has approved a new dividend policy that links payout to the level of cash/cash equivalents on its books, in turn increasing the payout up to 90% of PAT (v/s 50% payout under its old policy).

Outlook

Valuations at 20.7x/17.9x. FY22E/FY23E consolidated EPS largely capture in an expected recovery. We maintain our Neutral stance, with a TP of INR4,211/share (~18x Mar'23E consolidated EPS).

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