In the list of top 10 stock upgrades in the last quarter, Bajaj Auto witnessed the highest number of ‘buy’ calls at 34, up 10 percent quarter-on-quarter (QoQ). Despite export challenges experienced by the company over the last six-odd months, analysts have remained largely optimistic about Bajaj Auto. This is also reflected in the number of ‘hold’ calls on the stock seeing a significant reduction from 17 to 13, down 24 percent QoQ.
The company’s Q3FY23 performance exceeded street expectations, with net profit increasing 23 percent YoY to Rs 1,491 crore, and net operating income growing 3.3 percent YoY to Rs 9,319 crore. Earnings before interest, taxes, depreciation and amortisation (EBITDA) for the quarter also improved by 28.2 percent YoY to Rs 1,757 crore.
“The domestic business saw sustained double-digit revenue growth across both, two-wheelers (2W) and three-wheelers (3W). The 2W performance was buoyed particularly by solid 125cc+ festive season sales, while 3W volumes surged, leading to its record high market share,” the company said in an exchange filing.
“This is the highest-ever EBITDA for Bajaj Auto, aided by judicious pricing, better FX realisation and richer product mix. EBITDA margin improved by 366 bps YoY/ 171 bps QoQ to 18.9 percent. The all-time high EBITDA was despite the challenging situation in the export market,” said analysts at KR Choksey, who noted that double-digit revenue growth in the domestic business offset a drop in exports.
“BJAUT’s financial performance has been resilient despite the significant volume drop in the export market, bringing to light once again the benefit of its diversified business operations. BJAUT has continued to maintain its strong market position in the export market, which will benefit the company once the macro issues start subsiding after continuing to be depressed in the near term,” they added.
The company expects the international markets to remain unsettled for the next three to four months.
According to Axis Securities, exports are expected to pick up from May-June 2023. The brokerage has a ‘buy’ call for a target price (TP) of Rs 4,170 and believes Bajaj Auto has a strong presence in the growing 125cc+ segment.
The company gained 2 percent market share in the 125cc+ segment in 3QFY23. It is looking to introduce new models and expand platforms for offering a range of choices for customers in the segment.
“If I divide the market between 125cc and above ― which is now almost 50 percent of the Indian market ― and the lower half, then the upper half is outperforming the lower half by three or four times. So, that is the kind of difference and that is the reason why the 125cc+ segment, which in FY20 was about 45 percent, is now 50 percent. This is the trend we are seeing now,” said Rakesh Sharma, ED, Bajaj Auto, in an interview with ET.
He also added that in a bid to scale up their electric vehicle (EV) offerings the company recently completed restructuring of its supply chain, which gives a visibility of 10,000 units per month of the Chetak, Bajaj Auto’s electric scooter.
"We continue to remain positive on Bajaj Auto's performance going forward, led by its expected market share gains in domestic 125cc+ markets, and benefitting from ramping up the EV business," said Sharekhan. The brokerage has a ‘buy’ rating on the stock at a TP of Rs 4,151.
The share price of Bajaj Auto has increased 15 percent in the last one year, though it has declined 4 percent in the last one month. On Monday, the scrip closed flat on the NSE at Rs 3,732 apiece.