Buy Bajaj Auto, target price Rs 4261: LKP Securities

LKP Securities has buy call on Bajaj Auto with a target price of Rs 4261. The current market price of Bajaj Auto Ltd. is Rs 3878.2. Time period given by analyst is one year when Bajaj Auto Ltd. price can reach defined target.

Bajaj Auto Ltd., incorporated in the year 2007, is a Large Cap company (having a market cap of Rs 112385.81 Crore) operating in Auto sector.

Bajaj Auto Ltd. key Products/Revenue Segments include Automobile - 2 & 3 Wheelers, Export Incentives, Other Operating Revenue, Royalty Income and Scrap for the year ending 31-Mar-2022.


Financials
For the quarter ended 30-06-2022, the company reported a Consolidated Total Income of Rs 8324.54 Crore, up .74 % from last quarter Total Income of Rs 8263.70 Crore and up 7.90 % from last year same quarter Total Income of Rs 7715.34 Crore. Company reported net profit after tax of Rs 1163.33 Crore in latest quarter.

Investment Rationale
BAL posted decent performance in Q1 despite driven by the challenges in the domestic 2W industry. Going forward, the brokerage believes there will be a short term pressure on export volumes, while domestic 2W volumes should see a good improvement from Q2 as the chip issue gets resolved. It also expects a strong traction coming from new launches and good monsoons which would drive rural markets. On the exports front, markets like LatAm and Asia should be able to offset weakness in Africa. With higher capex associated with EVs, KTM Husky bike and Triumph (whenever it starts) at their Chakan plant shall further expand their market and ambit of portfolio. 3W performance should get back on track soon with chip issue resolving, EV 3W launch and success at CNG business. Favorable currency movement, easing of RM prices and price hikes should assist margins in the ensuing quarters. With strong balance sheet, robust return ratios, hefty dividend yield of 3.6% in FY22 and zero financial leverage, we believe the stock looks attractive at 17x FY 24E earnings. It maintains BUY rating on the stock with a pruned down target price of ₹4,261 (at 19x FY 24E earnings) on exports concerns

Promoter/FII Holdings
Promoters held 53.77 per cent stake in the company as of 30-Jun-2022, while FIIs owned 11.16 per cent, DIIs 12.4 per cent.