Bajaj Auto shares gain as Q2 standalone profit jumps 20%

The earnings before interest, taxes, depreciation and amortization (EBITDA) grew 25.5 percent on a Year on Year (YoY) basis to Rs 1,759 crore.

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Shares of Bajaj Auto rose 3 percent in early trade on October 17 after company declared its September quarter earnings last week.

Bajaj Auto Limited (BAL) on Friday reported a standalone net profit of Rs 1,530.00 crore for Q2FY23, up 20 percent from Rs 1,274.55 crore reported in the same quarter last year.

On a quarter-on-quarter (QoQ) basis, it rose 30 percent from 1,173.30 crore in the Q1FY23.

The company’s revenue from operations stood at Rs 10,202.77 crore, which was a 16 percent increase from Rs 8,762.18 crore logged in the corresponding quarter of the previous fiscal, the company said in an exchange filing.

On a sequential basis, its revenue rose 27.45 percent from Rs 8,004.90 crore in Q1 FY 2022-23.

The earnings before interest, taxes, depreciation and amortization (EBITDA) grew 25.5 percent on a Year on Year (YoY) basis to Rs 1,759 crore.

Operating margin also skyrocketed 125 basis points to 17.2 percent during the quarter under review.

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Here’s what brokerages have to say about stock and the company post June quarter earnings

Motilal Oswal

While the India 2W (two wheeler) business is showing signs of recovery, exports have bottomed out. Bajaj Auto market share would benefit over the long term from: a) the premiumization trend, b) the opportunity in exports, and c) the potential sizeable position in the Scooter market via EVs. However, a large part of its India profit pool (of premium motorcycle and 3Ws) is vulnerable to a possible disruption from electrification.

We reiterate our Neutral rating with a Target Price of Rs 4,000/share (16x Sep-24E consolidated EPS).

LKP Reaserch

With strong balance sheet, robust return ratios, hefty dividend yield of 3.9% in FY22 and zero financial leverage, we believe the stock looks attractive at 16.25x FY 24E earnings. We therefore maintain our BUY rating on the stock with a slightly pruned down target price (on exports concerns) of Rs 4,174 (at 19x FY 24E earnings).

Nirmal Bang

We remain constructive on Bajaj Auto amid the cyclical recovery in the 2W segment and emerging margin tailwinds. We tweak our FY24E/25E EPS downward by ~3%/2% and upgrade the stock to BUY with Sept’24E target price (TP) of Rs 4,102 vs Rs 4,354.

We value Bajaj Auto on SoTP basis, with the core business valued at Rs 3,105 (16x Sept’24E core EPS vs 17x earlier), cash of Rs 692/share and investment in KTM at Rs305/share. We downgrade the multiple to factor in the weakness in the export markets

Prabhudas Lilladher

Bajaj Auto’s 2QFY23 performance came ahead of our estimates, led by better-than-expected realization (at Rs 88.6k, +16/3% YoY/QoQ); which in turn led to better margins at 17.2% (+100bps QoQ, Ple:16.5%). This was driven by improved mix in exports and favorable currency realization. Domestic volumes doubled QoQ owing to festive season demand and restoration of supply chain.

Management expects single-digit growth from this festive season. In export markets, company took inventory correction measures, which led to lower exports (~40% of volumes vs 62% sequentially).

Maintain Hold with a target price of Rs 3,865 (at 16x Sep-24E EPS).

CLSA

We kept outperform rating on the stock and cut target price to Rs 4,100 per share.

The export outlook improving, and should pick up in H2, while domestic volume recovers on improved chip supply.

The model launches & distribution expansion should aid volume improvement.

CLSA has cut earnings assumptions by 2-6% for FY23-24 on lower volume & margin, reported CNBC-TV18.

Citi

We maintained sell rating on the stock and cut target price to Rs 3,300 from Rs 3,450 per share as Q2 was below estimate on weaker mix offsetting currency benefits.

The focus is on regaining domestic motorcycle market share. The easing commodity cost pressures & currency tailwinds could support margin.

The uncertainty in exports momentum is a concern and expect some pricing pressure as company endeavours to regain market share, reported CNBC-TV18.

UBS

We maintained neutral rating on the stock with a target at Rs 4,000 per share.

The Q2 EBITDA beat consensus by 9%/6% driven by superior mix in exports & one-offs. The weakness in exports will continue, while company expects some improvement sequentially.

In domestic 2-wheeler business, company expects low single-digit YoY growth during festive, reported CNBC-TV18.

Goldman Sachs

We kept buy rating on the stock with a target at Rs 4,500 per share.

The Q2 was a beat, as improving chip supply aiding market share build back. The news around export bans in Nigeria are less concerning than initially. Only 10% of Nigeria (Lagos city) has been covered in the ban.

However, raw material cost normalisation & inflection in 3-wheeler volumes will aid margin, reported CNBC-TV18.

At 09:45 hrs Bajaj Auto was quoting at Rs 3,660.70, up Rs 91.70, or 2.57 percent on the BSE.

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