“BUY” This Large Cap Auto Stock With A Target Price of Rs. 4,800: Sharekhan

The brokerage house Sharekhan Ltd is bullish on the shares of Bajaj Auto Ltd and commenced reporting on this large cap auto stock with a Buy rating. The brokerage has set a target price for the stock of Rs. 4,800, reflecting a 52 percent growth from the market price of Rs. 3,143. The stock was trading at a market price of Rs. 3,143 at the time of the brokerage's buy call, but it is currently trading at a market price of Rs. 3,156.40 per share on the NSE.

The brokerage’s take on Bajaj Auto Ltd

Sharekhan in its research report has noted that "Bajaj Auto Limited (BAL) continues to improve on overall sales, driven by robust export growth momentum, domestic market share gains and operational improvement. The management continues to remain positive on the growth prospects, especially exports, where BAL expects to gain market share in key markets, driven by the brand recall, product launches, enhanced distribution network and value for money proposition. The company expects to maintain an average monthly export run-rate of more than 2,00,000 units going forward. The recovery from sales from markets such as the Philippines, which was impacted due to COVID led restrictions, have a potential upside in sales."

According to the brokerage "The company has launched its e-2W scooter under the iconic brand "Chetak", which used to be the dominant brand in the two-wheelers market two decades ago. Bajaj Auto also holds a 48% stake in its technology partner KTM, which sells ~50,000 e-motorcycles globally. Also, we do not expect any major impact on sales due to faster EV adoption in the industry, due to its lower exposure to scooters. Over the medium-term, BAL is well prepared to scale its EV operations for both its 2W and 3W portfolio, as and when the industry witnesses demand and adequate charging infrastructure. The stock has corrected 24% in the last six months and is currently valued at 13.9x P/E and 8.8x EV/EBITDA of FY23E estimates."

Buy Bajaj Auto With A Target Price of Rs. 4,800 Says Sharekhan

The brokerage has stated that "BAL's business outlook remains positive with a recovery expected in FY2022, as economic activities normalise in the domestic market. The management expects exports to remain a key growth driver in FY2022. We expect BAL to continue to increase its market share in the domestic and export markets, given its strong portfolio of premium brands and cost-effective, entry-level electronic injection systems. OPM would expand because of a richer product mix, operating leverage and cost-control measures. The company has strong long-term revenue visibility, given its leadership position in the premium bikes segment and key export destinations."

Sharekhan has claimed that "Lacklustre domestic sales performance in last 3-4 months has led to 24% stock price correction in the last six months. The stock trades below its historical average P/E multiple of 13.9x and EV/EBITDA multiple of 8.8x its FY2023E estimates. Bajaj Auto is our most preferred pick in the two-wheeler space, led by strong exports, expected recovery in premium bikes and preparedness to scale EV business. Hence, we retain our Buy rating on the stock with an unchanged price target of Rs. 4,800."

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.