Bajaj Auto Has More In The Tank Even After A Year Of Records
Brokerages are bullish on Bajaj Auto in FY25 as the two-wheeler major is likely to outperform peers due to a strong product pipeline.
Bajaj Auto Ltd. could shift gears higher after witnessing a year of new records as premiumisation emerges as the dominant theme in India’s two-wheeler industry, analysts said. Exports, however, will still be a drag.
“Domestic two-wheeler demand is likely to see 7-8% year-on-year growth in FY25, with Bajaj Auto’s volume growth to be higher, due to new model launches,” Citi Research said in an April 19 note. “Exports recovery has started in certain markets, but large markets like Nigeria, Bangladesh, Egypt and Argentina continue to be impacted by headwinds.”
Analysts at Nuvama Research agreed. In fact, they expect the Pulsar maker to sustain industry leading numbers for the next three financial years.
“We anticipate strong urban demand, positive urban demand, new products, better finance availability and a favourable base effect to drive a domestic volume improvement of 8% CAGR over FY24–26,” Raghunandan NL, director at Nuvama Institutional Equities, said in an April 19 note.
“The upcoming launches in the premium and electric spaces should support volumes. The company is also launching a CNG motorcycle—with 50% lower running costs—targeting the 100-125 cc segment. A successful launch can provide an upside to volume estimates.
That outlook comes after a record-setting year for Bajaj Auto.
Net profit of the Pune-based automaker surged 33% year-on-year to Rs 7,479 crore in the fiscal ended March 31, 2024, on the back of revenue that rose 23% to Rs 44,685 crore—an all-time high, according to an exchange filing on April 18.
At Rs 8,825 crore, operational profitability was at its highest ever, as was free cash flow at Rs 6,600 crore, the management stated. The sales of premium brands—KTM and Pulsar—have never been higher.
Bajaj Auto Q4 2023-24 Results: Key Highlights (YoY)
Revenue up 28.97% at Rs 11,484.68 crore (Bloomberg estimate: Rs 11,114 crore)
Ebitda up 34.35% at Rs 2,306.25 crore (Bloomberg estimate: Rs 2,187 crore)
Ebitda margin up 81 basis points at 20.08% (Bloomberg estimate: 19.7%)
Net profit up 35.11% at Rs 1,936 crore (Bloomberg estimate: Rs 1,844 crore)
Total sales up 24.25% at 10,62,426 units
Here’s a look at brokerages’ take on Bajaj Auto’s Q4 results:
Motilal Oswal
Target Price: Rs 8,360 crore | Implied Downside: 7% | Rating: Neutral
Healthy Q4 FY24 performance as Ebitda/PAT came in higher, driven by a better average selling price of Rs 107,500/unit as against an estimated Rs 102,600/unit.
The management expects industry volumes to grow by 7-8% in FY25 with the premium segment growing faster than the industry.
Exports are recovering gradually but still are 25% below the FY22 peak. Currency situation in emerging markets continues to be fragile.
Despite the PLI benefit, the Chetak electric scooter would not be profitable at the unit level, and efforts are underway to reduce costs by way of localisation.
FY25/FY26 estimates maintained. After the recent sharp rally, the stock at 28X/24X in FY25/26 appears fairly valued.
Nuvama Research
Target Price: Rs 10,340 | Implied Upside: 15% | Rating: Buy
The two-wheeler volume prospects remain positive, with an estimated 9% CAGR over FY24-26, led by domestic growth (8%) and recovery in exports (11%).
The first CNG motorcycle launch is planned in June 2024, and the success of this product can provide an upside to volume estimates.
Revenue/Ebitda CAGR estimated at 13%-17% over FY24-26 with an RoE of 36%.
Citi Research
Target Price: Rs 6,500 | Implied Downside: 28% | Rating: Sell
Results beat estimates, driven by better-than-expected realisations
Positive management commentary on domestic demand,
3W demand should moderate in FY25 vs FY24
Focus on gaining market share in 125cc+, aided by new launches
Earnings estimate raised due to better demand, higher ASP, margins
Exports revival uncertain, current valuations adequately price in margin expansion