Markets are in a consolidation phase and the Sensex is hovering near that 58,000 points mark. "Market seems to have got its mojo back just before the year end. Reduced FII activity and positive news flows around economic growth has helped the market over the last few days. We expect market to remain sideways with positive bias until the end of the year. Q3 results season and build up to the upcoming budget session would be key triggers for the market in Jan 2022," says Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd.
Bajaj Auto: A good stock to buy and hold
Even as the markets consolidate the stock of Bajaj Auto maybe a good bet at the current levels. The shares have fallen from 52-week highs of Rs 4361 to Rs 3175, which is a loss of nearly 27%. The shares of the company are also now available at a reasonable price to earnings multiple of 14 times earnings.
Bajaj Auto is also a debt free company with a solid holdings in cash and cash equivalents. In fact, as on 30 September 2021, after payment of dividend of Rs 4,051 crore, surplus cash and cash equivalents stood at Rs 17,526 crore as against Rs 17,689 crore as on 31 March 2021.
Solid performance in the first half of 2021-22
Despite slowdown post the second wave of Covid-19 and sluggishness in the domestic market, Bajaj Auto has delivered a good performance for the half year end 30 September 2021. Motorcycles sold nearly 828,000 units in the domestic market; share of 19.1% in H1/2021-22 as against 18.2% in H1/2020-21. Commercial vehicles also sold over 58,000 units in the domestic market. The company continues to be a leader in the domestic market with share of 67.6% in H1/2021-22.
Valuations and view
We believe the stock of Bajaj Auto, which had dropped sharply from 52-week highs makes for an interesting pick on the valuations front. The company's business outlook remains robust with a solid recovery in FY2022-23, as economic activities normalise. The management also expects exports to remain a key growth driver in the years to come.
According to a recent Sharekhan report, Bajaj Auto has strong long-term revenue visibility, given its leadership position in the premium bikes segment and key export destinations. The company is also looking to move ahead and scale-up its electric vehicles business.
"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," Sharekhan recently said in its report.
A likely robust performance in the years to come, coupled with a steady stream of dividend, debt free status and huge holdings in cash and cash equivalents, makes Bajaj Auto shares a good pick at these levels.
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