Bajaj Auto Q4 profit jumps 12%: Should you buy, sell or hold the stock?

The Bajaj Auto share price will remain in focus on April 26 after the company posted better numbers for the quarter ended March 2023.

Bajaj Auto on April 25 reported a consolidated net profit for the quarter ended March 2023 of Rs 1,704.74 crore, up 11.70 percent from Rs 1,526.16 crore in the same quarter last year.

Revenue from operation came in at Rs 8,929.23 crore, registering a growth of 11.96 percent from Rs 7,974.84 crore in the year-ago quarter, the company said in a regulatory filing.

The board of directors of the company has recommended a dividend at the rate Rs 140 per share.

The company’s EBITDA maintained its strong run, growing 26 percent on-year to Rs 1,718 crore, with a margin accretion of 220 bps to 19.3 percent. Sequentially, price realisation and material costs held flat with favourable mix, driving a slight uptick, it said.

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Here is what brokerages have to say about stock and the company post March quarter earnings:

Morgan Stanley

Morgan Stanley has maintained its ‘overweight’ rating on the stock and raised its target price from Rs 4,486 to Rs 5,063. The report notes that although Q4 volumes were down, a better product mix drove EBITDA. The research firm raises earnings per share (EPS) estimates by 8 percent for FY24 and 12 percent for FY25.

CLSA

The research house has downgraded the stock from ‘buy’ to ‘outperform’ but raised its target price to Rs 4,659 per share. The Q4 results beat expectations due to a richer product mix and higher realizations, and that better forex realisations helped offset the impact of lower exports, resulting in a rise in margins.

CLSA raised its profit estimates for FY24-25 by 6-8 percent based on higher assumptions for average selling prices and revenue. However, expects modest growth in two-wheeler exports for FY24.

Motilal Oswal

Both domestic and export volumes are expected to recover in FY24 from the low base, driving healthy earnings recovery. Brokerage firm expect company to benefit from market share gains over the long term, driven by: (1) the premiumisation trend, (2) the opportunity in exports, and (3) the potential sizeable position in the Scooter market through EVs. However, a large part of its India profit pool (of premium motorcycle and 3Ws) is vulnerable to possible disruption from electrification.

At 17.7x/15.9x FY24/FY25 consolidated EPS, the stock’s valuation fairly reflects the expected recovery as well as the risk of EVs. The company’s dividend yield of 4.5-5 percent should support the stock.

It reiterated the ‘neutral’ rating with a target price of Rs 4,400 (based on 16x Mar’25 consolidated EPS).

Prabhudas Lilladher

Broking firm marginally increase its FY24/25 EPS estimates by 1-3 percent to factor in higher ASPs from increase in EV volumes, partially offset by cut in volumes for exports.

The company reported better than expected 4Q revenue, while EBITDA margin was largely in line. Margins expanded helped by significant inventorisation benefit, higher spare mix and better vehicle mix, offset by lower operating leverage.

Concerns on the export volumes continue (50 percent of sales) with company delaying the recovery timelines led by uncertainty on unavailability of USD and lower affordability. Also, lack of market share gains in the domestic motorcycles market over the last few years, and increase in competition could lead to further pricing actions.

However, Prabhudas Lilladher expects the company’s domestic premium segment volumes to grow (similar to the industry) helped by premiumisation trends and fast ramp-up of EVs could make us turn constructive on the stock.

It maintains ‘hold’ rating with a target price of Rs 4,130 (Rs 4,020 earlier) at 16x Mar-25 EPS.

Nirmal Bang

Overall, the broking house remain constructive on Bajaj Auto amid its resilient domestic operations.

It tweaks the FY24/FY25 EPS by 5 percent/7 percent and maintain accumulate rating with FY25 target price (TP) of Rs 4,509. It values the stock on SoTP basis, with the core business valued at Rs3,399 (15x FY25 core EPS), cash of Rs 806/share and investment in KTM at Rs 305/share.

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