Hold Bajaj Auto; target of Rs 8660: ICICI Securities

ICICI Securities research report on Bajaj Auto

Bajaj Auto’s (BJAUT) Q4FY24 EBITDA margin at 20.1% was flat QoQ (vs consensus estimate of 19.7%. Margin was flat QoQ mainly due to mix improvement (higher share of 3Ws), offsetting the impact of lower volumes. BJAUT is confident of retaining ~20%+ EBITDAM amidst rising scale of e2Ws in coming quarters, purely driven by rising scale of e3Ws and efficient cost management initiatives. We are factoring in 10%/8% growth in domestic volumes and 20%/25% growth in exports in FY25/26E, respectively, resulting in a revenue CAGR of 27% over FY24-26E (10% ASP CAGR).

Outlook

We maintain HOLD rating on BJAUT with a revised DCFbased target price of INR 8,660 (core business at INR 7,692, implying ~20x FY26E core EPS and cash/other investments of INR 969) vs INR 7,274 earlier. Change in target price is driven by rollover in valuation, higher earnings in FY25/26E and building in re-rating driven by the possibility of BJAUT delivering 20%+ EBITDAM despite rising e2W volumes.

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Bajaj Auto - 19042024 - isc