Bajaj Auto stock gathers steam as brokerages get bullish on exports outlook
The auto firm on Friday reported a 36.32% rise in net profit to Rs 1,175.47 crore led by robust sales across segments compared with net profit of Rs 862.25 crore during the last quarter of 2016-17.
The Bajaj Auto stock was trading higher in afternoon trade today after brokerages became bullish about the exports outlook of the firm. The stock rose as much as 3.8% to 2,824 level in trade today compared to its yesterday's closing price of 2719.90 on BSE. At 12:31 pm, the stock was trading 3.46% or 94.10 points higher at 2814 level.
Japanese financial major Nomura has said exports outlook for the Bajaj Group firm has improved, especially in African countries such as Nigeria, which benefit from rising oil prices. Nomura has raised the Bajaj Auto stock rating to 'buy' from 'neutral' with a target price of Rs 3,395 compared to Rs 3,252 earlier. The auto firm on Friday reported a 36.32% rise in net profit to Rs 1,175.47 crore led by robust sales across segments compared with net profit of Rs 862.25 crore during the last quarter of 2016-17.
Swiss financial services firm Credit Suisse too has raised target price for the stock to Rs 3,010 from Rs 2,940 and maintained "neutral" rating. Credit Suisse expects exports volumes to rise 10 to 12 percent in FY19, with three-wheeler volumes likely to continue to grow in near term.
Of the 51 brokerages covering the stock, 25 have 'buy' or higher ratings, 14 'hold' and 12 'sell' or lower, according to Thomson Reuters Eikon data with a median price target Rs 3,200.
Motilal Oswal too has given a target price of Rs 3,450 after its Q4 earnings announcement. "While we keep FY19 earnings per share (EPS) unchanged, we reduce FY20E EPS by 3%, as we marginally increase RM/Sales and tax rate. We believe the worst of volumes and margins are behind us. Volumes should revive in domestic as well as export markets. Valuations at 16.3 times FY19E and 1 4.2 times FY20E consolidated EPS are attractive. We value Bajaj Auto at Rs 3,450 (18 times FY20 E consolidated EPS)," the brokerage said in its post earnings report.
However, Prabhudas Lilladher has given a 'reduce' call on the stock with a target price of 2,709. The recommendation was made afterQ4 earnings announcement of Bajaj Auto.
"Bajaj Auto's domestic portfolio continues to be under stress with new launches/brands (V, Avengetum r, Dominar) failing to make a mark (apart from Pulsar, Bajaj Auto has been unable to create a brand in the motorcycle segment).
With the upsurge in the domestic three-wheeler market demand behind us, growth in key exports market would be crucial for Bajaj Auto to drive volumes. However, rising commodity costs and the company's inability to take the required price hike would keep margins under pressure, going forward and to factor that in, we reduce our margin estimates for FY19/20e by 130/160bps, respectively. At the current market price, the stock is trading at 18.7times FY19e and 17.7 times FY20e EPS. We value the stock at 18 times March 20 EPS plus Rs 100 as value of investments (KTM) and arrive at a target price of Rs 2709 (previously Rs 3026) and maintain 'Reduce'," Prabhudas Lilladher said in its report
Akash Jain, vice president, equity research at Ajcon Global has raised the target price for Bajaj Auto to 3,135 level. "We believe the company led by product innovations, sustained growth in exports, three wheelers doing well and a revival in demand for motorcycles in the domestic market, the company would witness good growth in the near future. At current market price of Rs 2,777 (Face Value: 10), the stock is valued at a P/E of 19x on FY18 EPS. We expect an upside of 13 percent with a target of Rs 3,135 by FY19 end (19 times on FY19 EPS of Rs 165)."
The stock has given -3.34% returns during the last one year and is down 15.28% since the beginning of this year.
The stock has been closing lower for the last 10 sessions. It closed 2.35% lower on May 18, 2018 when Q4 earnings of the auto maker were announced.
Total revenue from operations rose to Rs 6,773.30 crore for the reported quarter as compared with Rs 5,212.83 crore in the year-ago period, Bajaj Auto said. The company sold a total of 10,45,378 units in the fourth quarter as compared with 7,87,627 units in the year-ago period. Motorcycle sales stood at 8,56,389 units, up 22 per cent from 7,01,017 units earlier. For entire 2017-18, the company posted a net profit of Rs 4,218.95 crore, up 3.41 per cent from Rs 4,079.49 crore in 2016-17.
Total revenue from operations for the year rose to Rs 25,563.26 crore as compared with Rs 23,088.03 crore in 2016-17. During the year, the company sold a total of 40,06,791 units, up 33 per cent from 36,65,950 units in 2016-17. Motorcycle sales stood at 33,69,334 units, up 5 per cent from 32,19,932 units in 2016-17. Bajaj Auto said it recorded its highest ever commercial vehicle volume of 3,69,637 units in the domestic market for 2017-18 , growth of 46 per cent over 2016-17.