Bajaj Auto Buyback: This Bajaj Stock Hits New 52-Week High; What Will Be The Floor Price For Share Buyback?

Bajaj Group-backed auto giant, Bajaj Auto is in focus for its board meeting where the directors will consider the proposal for share buyback. This would be the second buyback by Bajaj Auto in less than two years. Ahead of the meeting, Bajaj Auto shares touched a new 52-week high. Notably, experts believe the buyback floor price will be at a premium between Rs 7,800 to Rs 8,000.

On Friday, Bajaj Auto's share price touched a new 52-week high of Rs 7,088 apiece before ending at Rs 6,968.15 apiece, up by 0.72% on BSE with a market cap of Rs 1,97,323.90 crore.

In the trading week that ended on January 5th, Bajaj Auto's share gained by 3.4%.

As per the regulatory filing, Bajaj Auto stated that the board of directors is scheduled on January 8, inter alia, to consider and approve a proposal to buyback of fully paid-up equity shares of the company and other matters necessary and incidental thereto, in accordance with the applicable provisions of the Companies Act, 2013.

The announcement was made on January 3rd when Bajaj Auto shares stood at Rs 6,986.50 apiece on NSE and at Rs 6,989.40 on BSE.

Talking about the buyback floor price which is likely to be announced on January 8th, Prashanth Tapse, Senior VP (Research), Mehta Equities said, "Bajaj Auto to consider buyback of equity shares on January 8' 2024 and management says that this buyback size will be bigger than the previous instance. In its last offer, the buyback was worth Rs 2500 crore and was done via open market through the stock exchange mechanism at the rate Rs 4600 per share buyback price. If we assume a bigger buyback size compared to the previous instance at the current price, we can expect a price Rs 7800/ Rs 8000 range buyback."

The last buyback that Bajaj Auto launched was of Rs 2,500 crore between July 4th to October 10th of 2022. The floor price of this buyback was at Rs 4,600 per share.

Should you buy Bajaj Auto share price?

In its latest research report, Sharekhan said, We reiterate our Buy on Bajaj Auto (BAL) with revised PT of Rs. 7,567 on (1) It's a brand-focused play in the domestic market (2) Ramp-up in Triumph's distribution network (3) Market share gain in EV segment (4) its new product launch strategy and (5) Expectation of gradual improvement in exports. BAL has been witnessing healthy retail trends even after a strong festive season leading its structural play in the above 125 cc segment. Further, it has strongly established its brand - Chetak in the EV market and harnessed a 12% market share, given BAL has been assumed to be a late entrant in the EV segment.

Also, Sharekhan's note said, its brand-focussed play has been paying a healthy dividend as Triumph 400 is cornering 15-20% market share in some city-specific markets as Triumph 400 has yet to be available on a pan-India basis. The shipments have been delayed to some of the parts in Latin America and Africa in December 2023 due to the Red Sea issue but has not materially affected its performance so far.

The brokerage cited that Bajaj Aut management has indicated that it has not lost volumes due to ocean transportation issues and assumes that the disruptions would not last long. While refreshed versions of the Pulsar range of products are performing well, BAL is planning for a number of new launches in the coming months.

With a healthy festive sale, BAL continues to gain traction in the above 125 cc segment supported by its strong position in mass premium motorcycle markets. Export volumes are appearing bottomed out and export volumes are expected to improve gradually. Further, its three-wheeler business has been reviving on return in demand and a rise in the CNG network in the domestic market. The management has indicated that the Red Sea issue has not materially hit its exports so far and assumes that this issue would not last long, as per the brokerage.

Further, it highlighted that with the launch of the Triumph 400, BAL has entered the iconic premium motorcycle segment, given it has already been a leading player in the mass premium motorcycle segment. Sharekhan's note said, "We believe BAL has been plugging the gaps in its portfolio and is playing with a bunch of brand portfolios in multiple segments." Also, it believes that the listing of OLA Electric would unlock the valuation for its EV business as it also enjoys around 10% market share in the electric two-wheeler market indicating that its electric 3 wheeler business is not a margin dilutive proposition.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.