Accumulate Bajaj Auto; target of Rs 3300: East India Securities

East India Securitie's report on Bajaj Auto

Q2FY21 performance was reasonably good with a sharp recovery witnessed in domestic 2Ws and exports almost back on its feet. With the increase in inquiry levels in cities during festival season, Bajaj’s premium portfolio sales should shoot up. In exports, major markets like Africa, LatAm & the Middle East witnessed a swift recovery. 2Ws exports reached at 90% levels and 3Ws at 75-80%. With stability in currencies, oil prices and political situation in international markets, the sales could be back to 100% of the normal level by Jan 2021. The worrying signals are only in domestic 3Ws, which is moving up at a snail’s pace. Margin should sustain at 16.4% level as a rise in commodity prices should get offset by better product/geographic mix and baby step increase in model prices should help offset some of the impact.

Outlook

Accumulate. We maintain ‘Accumulate’ rating with a target price of 3,300 (16x Sept ’22 EPS of Rs 196 plus the value of KTM at Rs 165/share).

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