Bajaj Auto gains 3%, hits new peak post Q4 nos on healthy growth prospects

Shares of Bajaj Auto hit a new peak of Rs 4,410.95, gaining 3 per cent on the BSE in Thursday's intra-day trade, on healthy growth prospects. In the past one month, the stock of the top 2/3-wheelers' exporter in the country has rallied 16 per cent. In comparison, the S&P BSE Sensex was 5 per cent rise in the S&P BSE Sensex. For January-March quarter (Q4FY23), Bajaj Auto's Ebitda (earnings before interest, taxes, depreciation, and amortization) maintained its strong run, growing 26 per cent year-on-year (YoY) to Rs 1,718 crore, with margin accretion of over 220 bps to 19.3 per cent. Sequentially, across quarters, price realisation and material costs held flat with a favourable mix driving the slight uptick, the company said. Revenue from operations stood at Rs 8,905 crore, up 12 per cent YoY, led by the sustained momentum on the domestic business that delivered strong volume-led revenue growth (over 50 per cent YoY). Compared to same time last year, better foreign exchange realization, judicious pricing, and a richer product mix all helped offset the drop in overall volumes arising from sluggish exports, it added. The company recommended a dividend of Rs 140 per share for FY23 with the record date for the same set as June 30, 2023. The management said the retails in export market have steadily improved and inventory levels were low as customers are now accepting increased prices. Further the company was able to maintain its market share in export market with Pulsar 125 dominating the Latin market. "The management informed about the launch of its first premium offering with Triumph to be launched on June 27, 2023 (jointly developed product), with deliveries to commence in Q2FY24. Also, the company will look after domestic sales operation for Triumph whereas global sales will be handled by Triumph," analysts at ICICI Securities said in a result update. The brokerage firm maintains its HOLD rating on Bajaj Auto awaiting ramp-up in electric vehicle (EV) 2-W domain; delay in debut of captive electric-3-W launch & management guidance over gradual improvement in key export markets amid persistent issues with availability of forex and devaluation of currencies, it added. Going ahead, the growth in the 2 wheeler industry will be driven by premiumization efforts in 125cc+ category in which Bajaj Auto has a strong foothold with differentiated products on offer from entry range to premium sports bike. Additionally, its collaboration with Triumph could unlock further growth levers in premium variant of bikes while volumes recovery from the international market is also expected to drive growth for the company, said those at Religare Broking. The brokerage firm said it remains positive on the company's growth prospect and estimates its revenue/Ebitda/PAT to grow at 18.2 per cent/17 per cent/15.9 per cent CAGR over FY23-25E. "We have assigned a PE of 18x on FY25E EPS and revised our rating from buy to accumulate with a target price of Rs 4,807," it added. That apart, the management indicated that although retail demand in key export markets is likely to have bottomed out, the lack of availability of US dollar for trade remains the major factor hampering export visibility. "The domestic motorcycle industry continues to see demand weakness and management is now guiding for 6-8 per cent volume growth over next few quarters for the industry," analysts at HDFC Securities said in results update. Also, the brokerage firm believes that once volumes revive, even the current favorable mix will normalize. This coupled with the slight under-recovery of the recent cost inflation is likely to keep margins under pressure from here on.