Bajaj Auto: Better realisation, exports to buoy two-wheeler major
The biggest surprise in Bajaj Auto results was 7% rise in average realisation per unit because of better product mix and price hikes
Dalal Street gave a thumbs up to Bajaj Auto Q4FY21 results as the stock is trading 0.5 % higher at 3,853 despite benchmark indices falling 1.25%. Bajaj Auto’s net profit rose 1.7% to Rs 1,332.07 crore in March 2021 compared to Rs 1,310.29 crore in March 2020.
The two-wheeler maker reported a 26% year-on-year rise in revenues for the quarter to Rs 8,596.1 crore led by a lower base in the year-ago quarter, which was affected by the national lockdown. During the quarter ended March 2021, Bajaj Auto sold a total of 1,169,664 vehicles, up 18% as compared to 991,961 units sold in the same period of last year. At the operating level, Bajaj Auto reported a 20% year-on-year growth in EBITDA (earnings before interest, tax, depreciation and amortisation) at Rs 1,558 crore. However, the EBITDA margins contracted 90 basis points to 18.1% led by higher input costs.
The biggest surprise in Bajaj Auto results was 7% rise in average realization per unit because of better product mix and price hikes taken by the company. This has made analyst upbeat on the stock here is what they have to say.
Kotak Institutional Equities | Target price: Rs 4,600 | Upside: 19%
Bajaj Auto company to maintain/improve its profitability on a YoY basis despite RM headwinds led by a richer product mix in both exports and domestic motorcycle segments – premium motorcycle mix in export markets has improved by 480 bps YoY and 11.7% YoY in domestic markets in FY2021, implementation of the RoDTEP (Remission of Duties and Taxes on Export Products) scheme (1-1.5% positive impact), benefit of rupee depreciation against USD and staggered price hikes in both domestic and export markets.
Sharekhan | Target price: Rs 4,589 | Upside: 19%
Bajaj Auto’s business outlook remains positive with a strong recovery expected in FY2022, driven by normalisation of economic activities. Management expects exports to remain the key driver in FY2022. The company will continue to increase its market share in domestic and export markets, given its strong portfolio of premium brands and cost-effective electronic injection system at entry-level. The operating profit margin would expand because of richer product mix, operating leverage, and cost-control measures. The company has a strong long-term revenue visibility, given its leadership position in the premium bikes segment and key export destinations. The company may post a 17.8% CAGR during FY2021-FY2023E, driven by a 16.1% revenue CAGR and 90 bps improvement in EBITDA margin. The stock is trading below its historical average P/E multiple of 17.5x and EV/EBITDA multiple of 11.9x its FY2023E estimates.
Edelweiss | Target price: Rs 4,428 | Upside: 15%
Bajaj Auto’s strong execution in the past three years, the potential for new product/platform launches in 12 months, currency tailwind (~45% exports), recovery in three-wheelers (3W), strong export outlook and revised dividend policy providing almost 5% yield. The company has adequate levers to counter commodity pressure and softening demand compared to peers.
Antique | Target price: Rs 4,400 | Upside: 15%
Bajaj Auto is well poised to benefit from the structural premiumisation trend in the domestic 2Ws industry. In addition, its market leadership in various export markets make it well-placed to benefit from the large growth potential in export markets. A higher-than-industry growth along with smart product actions/innovations would continue to drive valuation re-rating
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