On November 28, the stock reached a significant milestone by surpassing the ₹6,000 mark and then maintained its upward trajectory, reaching an all-time high of ₹6,217 per during the Monday trade. Projections by domestic brokerage firm KR Choksey indicate that the stock is poised for further upward momentum.
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In its recent report, the brokerage highlighted the company’s strong volume growth in the domestic market during the festive season, and it says the company is witnessing healthy demand even after the end of the festive season.
It further added that the company’s sharp focus on the 125cc+ segment within domestic 2W is yielding market gains and a positive mix. During the 7-Oct-Nov 2023 period, retail growth for the domestic motorcycle industry stood at 8.0% YoY, while Bajaj Auto grew at 2x that rate. Notably, in the 125cc+ segment, Bajaj Auto grew at 3x the industry growth rate of 9.0% YoY, noted KR Choksey.
According to the brokerage, the 125cc+ segment now accounts for 65% of Bajaj Auto’s domestic 2W volumes compared to 50% for the industry. The company has gained 500 basis points market share on a YoY basis in this segment and is betting big with new product launches.
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Further, the brokerage said that the increase in demand for Triumph in the professional cycling segment has surprised positively and will gradually contribute to volumes and mix going forward as Bajaj Auto increases capacity and distribution. During the 2 months of September-October 2023, its pro-cycling segment (KTM+Triumph) saw a growth of 50% YoY.
The company was preparing for an average of 5,000 monthly capacity for Triumph but was surprised positively by the market demand. In Q2FY24, the company sold 8,000 units of Triumph and plans to take it up to 18,000 units in Q3FY24E by expanding the capacities.
Moreover, Bajaj Auto achieved its best festive performance for Pulsar this year, crossing 0.5 million units in sales. Additionally, Chetak e-scooter has greatly increased its VAHAN market share from 5% to 15% within two months, securing the third position in the market, highlighted KR Choksey.
Also Read: Auto volume review: 2Ws shines in Nov; TVS, Bajaj Auto, Eicher among companies with double-digit domestic wholesale growth
With monthly sales averaging 10,000 units, the brokerage said the company plans to expand its capacity to reach 20,000 units per month by the end of Q3FY24E.
A strong trajectory in the domestic CV segment is expected to continue, driven by increasing penetration of CNG and EVs. The export market, however, remains subdued, but is seeing sequential improvements in terms of volumes, it added.
The brokerage foresees a stable margin environment for BJAUT as input costs are largely constant and the margin increase from higher share of 125cc+ within domestic 2w may be offset by unfavorable improvement in 2w sales in export markets.
Also Read: Sales of electric two-wheelers in the fast lane in November
The brokerage revised its FY24E and FY25E EPS estimates up by 1.1% and 1.2%, respectively, and introduced estimates for FY26E. It expects income, EBITDA, and adj. PAT will grow at a CAGR of 15.9%, 19.3% and 16.4%, respectively, over FY23-FY26E.
The brokerage assigns a P/E multiple of 21.0x on FY26E EPS of ₹337.8, resulting in a target price of ₹7,093 apiece for the shares, implying an upside potential of 17.7%. Accordingly, it upgraded the recommendation to “buy” from “accumulated” on the stock.
Disclaimer: The opinions and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 06 Dec 2023, 14:20 IST