Most brokerages remained bullish on Bajaj Auto Ltd., citing a recovery in demand for two-wheelers, healthy outlook for exports and focus on electric vehicles even as near-term pressures on margin persist.
While Jefferies expects the two-wheeler demand to “recover from abnormal cyclical trough”, Nomura is witnessing a “tepid recovery”. Exports demand recovery has been much faster, Nomura said.
The Pune-based two-wheeler maker saw its profit and revenue fall sequentially in the quarter ended June. Its margin, too, contracted.
Bajaj Auto has sold 13.6% fewer vehicles over the previous quarter at 10.29 lakh units in the April-June period. The company, in a post-earnings release, said its overall share in the domestic market has risen from 17.3% to 19.7%.
Shares of Bajaj Auto swung between gains and losses. The stock was trading 0.1% higher at Rs 3,857.10 as of 12:15 p.m. after seeing an intraday high of Rs 3,925 and a low of Rs 3,825.05. Of the 49 analysts tracking Bajaj Auto, 32 have a ‘buy’ rating, 11 suggest a ‘hold’ and six recommend a ‘sell’, according to Bloomberg data.
Here’s what brokerages have to say about Bajaj Auto’s first-quarter FY22 results...
Nomura
Maintains ‘buy’ rating with a target price of Rs 4,668 apiece, implying a upside of 21% from Thursday’s close.
Exports outlook remains healthy.
Domestic two-wheeler industry seeing tepid recovery.
Focus on developing the premium segment.
Bajaj needs to catchup in electric vehicles by localising Chetak scooter and launching more products.
Margins to improve, supported by price hikes, potential resumption of export incentives and higher three-wheeler mix.
Jefferies
Maintains ‘buy’ rating with a target price of Rs 4,400 apiece, implying an upside of 14% from Thursday’s close.
Two-wheeler demand should recover from abnormal cyclical trough.
Margin pressure to peak out in H1 FY22.
Bajaj gained 160bp market share in motorcycles in Q1 FY22.
Prefers TVS and Eicher over Bajaj in the two-wheeler space.
Strong presence in export providing large headroom for long-term growth.
Prabhudas Lilladher
Maintains ‘hold’ rating with a target price of Rs 3,919 apiece, implying a upside of 1.7% from Thursday’s close.
Raw material inflation, negative operating leverage dent margins.
Exports remain robust, despite restrictions in key Asean and South Asia market.
New model launches pipeline remain robust over the next 9-12 months.
Emkay Global
Maintains ‘buy’ rating with a target price of Rs 4,420 apiece, implying a upside of 15% from Thursday’s close.
Volume recovery likely from Q2FY22.
Expects the strong momentum in exports to continue, while domestic volumes should recover swiftly ahead.
Focus on EVs have increased with the incorporation of a separate subsidiary for manufacturing two-wheelers, three-wheelers and four-wheelers.
Lower-than-expected demand in key geographies is a risk.
Motilal Oswal
Maintains ‘buy’ rating with a target price of Rs 4,250 apiece, implying a upside of 10% from Thursday’s close.
Near-term outlook muted for domestic two-wheelers.
Margin to be impacted by commodity headwinds in the near term.
Bajaj Auto has several levers to support margin and dilute the impact of cost inflation and operating deleverage.
To benefit from premiumisation trend, good growth opportunity in exports, and potential position in the scooter market via EVs.
RECOMMENDED FOR YOU
POPULAR