Why Morgan Stanley is bullish on Bajaj Auto despite 10% YoY drop in October auto sales?

Stock to Buy: Despite a 10 per cent year-on-year drop in October auto sales, brokerage firm Morgan Stanley has upgraded its stance on Bajaj Auto from ‘Equalweight’ to ‘Overweight’. The brokerage is bullish on this stock, relying on month-on-month improvement in its domestic two-wheeler demand.  

The brokerage has also revised its price target to Rs 4309 from Rs 3956, earlier.  

Bajaj Auto was the top gainer on Nifty today and was trading at Rs 3,801.45, up by Rs 64 or 1.73 per cent from the Wednesday closing price.  

The lackluster exports scenario, which has been a major drag for the company has been priced-in now, the brokerage said.  

While combined domestic sales of its two-wheeler and commercial vehicle segments grew 11 per cent YOY to 242,917 in previous month over 218,565 recorded in October 2021, the exports fell by 31 per cent to 152,321 during this period. 

The two-wheeler segment grew 4 per cent YoY in October 2022 to 206,131 from 198,738 vehicles in October 2021. Two-wheeler exports fell 29 per cent to 1,35,772 vehicles in October.

 Source: Bajaj Auto Exchange Filing 

The company which has a strong product portfolio in premium motorcycle segment is expected to do well in this vertical, opines Morgan Stanley.  The company boasts of brands like Pulsar, KTM and Triumph.  

Technical View 

Analyst Nilesh Jain sees an upside of Rs 100 from current level. He cited strong chart structure. Jain, who is Assistant Vice President - Lead Derivative and Technical Research at Centrum Broking said that the stock has formed a double bottom at Rs 3450 which acts as strong support.  

Investors looking to make fresh positions can buy at current levels. He puts the stop loss at Rs 3700 while a positional target of Rs 4050. The near-term target is Rs 3900. 

Meanwhile Macquarie maintains a ‘Neutral’ stance with target of Rs 3957. Nomura also maintains a ‘Neutral’ stance with a price target of Rs 4021.  

(Disclaimer: The views/suggestions/advises expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)