What should investors do with Bajaj Auto post Q2 numbers: Buy, sell or hold?

The two-and-three-wheeler maker, Bajaj Auto share price rose in early trade on October 23 a day after the company reported its Q2 earnings.

The company has reported an 18.8 percent year-on-year decline in September quarter standalone profit to Rs 1,138.2 crore, missing a CNBC-TV18 poll estimates which of Rs 1,212 crore.

Revenue from operations declined 7.2 percent year-on-year to Rs 7,156 crore in Q2 FY21 with sales volume declining 10.2 percent YoY to 10.53 lakh units and realisation rising 3.4 percent YoY.

Here is what brokerages have to say on the stock:

Sharekhan

Bajaj Auto is witnessing a strong recovery in the export markets with expectations of growth in Q3FY21 and Q4FY21 as well. Domestic market is also improving with sales reaching flat volumes at the beginning of of the festive season.

At CMP, the stock is trading at 14.8x FY23 earnings which is lower than its long-term average historical multiple of 17x. Hence, it retain buy rating on the stock with unchanged price target of Rs 3,500.

Prabhudas Lilladher

Company's 2QFY21 revenues/EBITDA were in-line while adjusted PAT slightly missed estimates at Rs 11.4 bn (PLe Rs12bn), led by lower other income.

Prabhudas Lilladher believe 2W recovery both in domestic and exports markets have been better (to an extent 90-95%), company's 3W portfolio to remain under pressure (~25- 30% recovery in domestic 3W led by cargo).

It upgrade FY21/22/23 EPS by 5%/1%/3% to factor in for cost efficiencies and maintain ‘Hold’ on the stock with revised price target of Rs 3,108 (earlier Rs3,014) at 17x (in-line with 10 year LPA Sep’22 EPS, unchanged). Stock trades at 16.6x/15.9x FY22/23 EPS.

Dolat Capital

Broking house maintain its positive stance on Bajaj Auto given 1) improving outlook for domestic and export 2W segments owing to increasing preference for personal mobility; 2) operating efficiency and volume recovery to support EBITDA margin and 3) strong cash reserves.

It believe the company will continue to gain market share in the export market led by superior product offerings, better distribution network, lean cost structure due to high economies of scale and higher resale value. It increase EPS estimates by 2/4% for FY22/23E and maintain an accumulate rating with target price Rs 3,352 (16x FY23E core EPS + cash + KTM stake).

CLSA

The cost controls drive earnings beat, while EBITDA margin continues to surprise, said CLSA.

The management said demand for all categories except 3-wheelers was 80-90% of normal. CLSA increased FY21-23 EPS estimates by 2-4% and keep buy call with target raised to Rs 3,575 from Rs 3,480, reported CNBC-TV18.