Bajaj Auto climbs 5% on strong Q2 show; brokerages maintain a mixed view

Shares of Bajaj Auto spiked in morning deals by as much as 4.84 per cent to hit the day's high price of Rs 5393.3 per share on the BSE post its strong Q2 show. Ahead of the results on Wednesday, the scrip ended on a flattish note at Rs 5143.8, up a tad 0.06 per cent apiece on the BSE.

The 2 and 3-wheeler company’s standalone net profit for the September quarter increased 20 per cent year-on-year (YoY) to Rs 1,836.14 crore to Rs 1836.14 crore. The figure in the corresponding period last year was Rs 1530 crore. 

Revenue from operations at the Pune-based auto company for the July-September period registered a new high of Rs 10,777.27 crore, marking a 5.6 per cent increase YoY from the Rs 10,202.77 crore posted in the same quarter of the previous fiscal year. The revenue growth was underpinned by double-digit volume growth, with the sustained buoyancy on the domestic front cushioning the weak, albeit improving export performance, said the company.

Quarterly EBITDA came in at Rs 2,133 crore, surpassing the Rs 2000 crore milestone for the first time, registering 21 per cent YoY. The company’s margin also expanded 260 basis points YoY to 19.8 per cent during the review period, owing to better realisation and an improved product mix, which more than offset the drag due to investments in the electric scooter segment.

The company’s domestic business also hit a new peak during the Q2FY24 period, in the backdrop of six successive quarters of double-digit YoY growth.

On the exports front, the company is on course to see gradual recovery and posted a 8 per cent increase in volume quarter-on-quarter.

Should you buy, sell or hold Bajaj Auto stock?

Even as  the company’s domestic business momentum has propelled its September performance to record high, brokerages are mixed on the counter. Global brokerage Morgan Stanley is overweight on the counter and has suggested a target of Rs 5449. Morgan Stanley in a note said the company saw another good quarter.With margins at par with internal combustion engine (ICE) 3Ws, E3Ws form another whitespace opportunity for Bajaj apart from E2Ws & Triumph. Although F25 P/E of 18x is close to its 10Y avg., impending export recovery & whitespace opportunities keep us overweight, it added.

Likewise, JP Morgan also maintains an overweight call on the automaker and has raised the target price from Rs 5760 to Rs 6100.

Macquarie has given a neutral call on the counter with a target price of Rs 5383. The company revised its shareholder policy wherein annual payout (as % of net profit) will depend upon cash balance at end of FY– >70% payout if surplus funds are >Rs150bn &<50% if surplus is below Rs75bn, noted the brokerage.