INSUBCONTINENT EXCLUSIVE:
LKP Securities has a buy call on Bajaj Auto Ltd
with a target price of Rs 3164
The current market price of Bajaj Auto Ltd
Time period given by the brokerage is a year when Bajaj Auto Ltd
price can reach defined target
Bajaj Auto Ltd., incorporated in 2007, is a large-cap company with a market cap of Rs 80322.50 crore.
Investment rationale by LKPOn the domestic motorcycle front we believe that the company will perform well hereon through the comeback of
Discover model sales and new launches of Discover, Avenger refreshes and V family upgrades
We expect market share to move up from the current levels on these launches
On the 3W business front, triggers from various states mentioned above will lead to the passenger 3W segment sales moving up
On the exports front, we are seeing a strong growth through entry into new geographies like Turkey and Iran
The most heartening sign is Nigeria coming back to normalcy, with volumes surging in both 2W as well as 3W business
Egypt too has gain stability
On the back of this, margins are expected to move up on high margin 3W and exports and price hikes taken recently
However, we may see some downward pressure on margins on account of higher RM costs
Extinction of the Pantnagar(~25% of domestic production) tax benefits from Q4 has led to increase in tax rate(32.2%) from the ensuing
quarters, which may result into bottomline getting a bit depressed
The effect of that was seen in Q4 as well
On the other hand, higher other income expectations on regular FMP maturity may augur well for the bottomline on and off (also seen in Q4)
We believe the risk to reward ratio is high for this company considering good bottomline growth despite the negatives stated above, clean
cash rich balance sheet, robust return ratios and above all, a proxy to the domestic as well as global 2W industry
We maintain BUY rating on the stock with a reduced target of ? 3,164 on some margin concerns.
