Axis Securities report on Bajaj Auto
The management is focused on the 125cc+ segment which formed 70% of the overall volumes in Q1 (66% in FY23). It expects the domestic MC industry to grow at 4-6% (earlier 6-8% guidance in Q4FY23) over the next few quarters. On exports, the management informed that retails have outpaced wholesale dispatches and there is substantial headroom for growth to build back the inventory. Nevertheless, due to macroeconomic situation and geopolitical challenges gradual recovery is expected post Q2FY24. Triumph, KTM and Husqvarna to aid in product premiumisation and higher ASP. Furthermore, EV launches in the next 12 months across segments along with network expansion to aid in faster growth than the industry.
Outlook
We therefore value the stock at 17x its Jun’25E core EPS (Rs 4,348/share), add for the company’s stake in PMAG and surplus cash reserves at 1x book value to arrive at our TP of Rs 5,400/share (from Rs 4,785/share earlier), implying 11.5% upside from the CMP. We maintain our BUY rating on the stock.
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