500-1400% Dividends: Bajaj Auto Vs TVS Motor: Which One Of Them Is Hot To Buy In Automobile Segment?

Bajaj Auto and TVS Motor are one of the top two-wheelers manufacturers. Both companies have declared their earnings for Q3FY24, under which they registered double-digit profit growth. Both companies are also among dividend-paying stocks. Brokerages have recommended buying Bajaj Auto and TVS Motor.

Bajaj Auto:

On BSE, Bajaj Auto's share price stood at Rs 7,596.85 apiece, up by 5.4% with an m-cap of Rs 2.15 lakh crore on January 25. The stock also touched a new 52-week high of Rs 7,625 apiece on the day as well.

In Q3FY24, Bajaj Auto's revenue from operations scaled a new peak of Rs 12, 114 crore, up by 30% YoY driven by the acceleration of the domestic business, which on the back of sharp execution and impactful activation during the festive season, cushioned the relatively subdued albeit recovering export sales amidst continued challenges in overseas markets.

Further, Bajaj Auto said, quarterly EBITDA was at its highest ever at Rs 2,430 crores, up 37% YoY; Profit after Tax surpassed the Rs 2,000 crore milestone. Margin steps up further to 20.1 %, up +100 bps YoY, driven by better realisations, dynamic cost management and operating leverage which more than absorbed the drag from competitive investments on the growing scale of electric scooter. PAT was at Rs 2,042 crore up by 37% YoY.

Bajaj Auto earlier paid up to 1400% dividend amounting to Rs 140 per share in 2024. It has a dividend yield of 1.84%.

Post Q3 results, Religare Broking said, ": Bajaj Auto continues to deliver strong performance which is mainly led by healthy demand in the domestic market across segments. The recovery in the international market as well as sustained demand momentum and new launches across its portfolio will continue to drive the volume while premiumization towards 125+cc motorcycles would transcribe in healthy revenue expansion."

Further, Religare's note said, "Additionally, the increased penetration of CNG pumps as well as improved mobility would also drive the overall 3-wheeler sales. Factoring this, we estimate its revenue/EBITDA/PAT to grow at 17.4%/22.4%/23.7% CAGR over FY23-25E. We have assigned a PE of 22x on FY26E EPS and recommend a Buy rating with a revised target price upwards to Rs. 8,398."

TVS Motor Company:

On BSE, TVS Motor's share price stood at Rs 1,941.75 apiece, down by 3.02% on Friday with a market cap of Rs 92,250.04 crore.

The company paid up to 500% dividend amounting to Rs 5 per share in 2023. It has a dividend yield of 0.26%.

In Q3FY24, Bajaj Auto's Operating EBITDA grew by 40% at Rs. 924 Crores for the third quarter of 2023- 24 as against EBITDA of Rs. 659 Crores in the third quarter of 2022-23. The Company's Operating EBITDA margin for the quarter is highest at 11.2% as against the Operating EBITDA margin of 10.1% reported in the third quarter of 2022-23. The Company's Profit After Tax (PAT) grew by 68% at Rs. 593 Crores for the third quarter of 2023-24 as against PAT of Rs. 353 Crores in the third quarter of 2022-23.

Operating revenue reported for the nine months ended December 2023 is Rs. 23,608 Crores as against Rs. 19,773 Crores reported for the nine months ended December 2022.

In its research note, JM Financial said, "We expect TVSL's outperformance to continue on the volume front (led by premiumization and EV product launches), while higher operating leverage and astute cost management would help on the margin front. We estimate revenue / EPS CAGR of 16%/30% over FY23-26E. We maintain BUY with a Mar'25 TP of INR 2,100 (30x Mar'26E EPS [25x earlier]). Prolonged slowdown in international markets remains a key risk."

Also, Elara Capital said, "TVSL's margin and EBITDA/ vehicle scaling new highs despite EV rampup is a testament to its improving underlying ICE business margin. We are monitoring volume recovery in the exports markets, upcoming EV 2W and 3W launch, and probable fundraising for the EV subsidiary and strategic investments."

Further, Elara said, "TVSL is a perfect play on a) consistent domestic 2W market share increase, b) continuous exports growth outperformance and c) structural margin increase potential. Expect a revenue CAGR of 18%, an EBITDA CAGR of 27% and an EPS CAGR of 34%, with margin expansion of 250bps in FY23-26E as demand revives. We largely retain estimates and maintain Accumulate. Our new TP stands at INR 2,100 from INR 2,006 on 26x (unchanged). We ascribe INR 98 to TVS Credit Services."

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, nor 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.