Bajaj Auto, Alkem Labs, SAMIL, Deepak Nitrite, SAIL, Cummins, Birlasoft, Suprajit Eng, Heidelberg Q4 Review

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HDFC Securities Institutional Equities

Bajaj Auto - Headwinds galore

Bajaj Auto Ltd.’s Q4 FY25 Ebitda margin at 20.2% was 13 bps above our estimate and 8bps above the Bloomberg consensus estimate. Management has done a great job in maintaining margins at 20.2% across the four quarters of FY25, despite the rising EV mix, which is margin-dilutive. Though the company has ramped up well in the e2W and e3W segments, we remain cautious due to the following concerns:

1. higher competitive intensity in the EV segment is leading to higher discounting as well as threat of shortage of rare earth supply that could impact production by July 2025;

2. while introduction of the erickshaw is expected to aid growth, we remain wary of the margins in this pricesensitive segment;

3. the company is facing growth challenges in the CNG bike segment, considering that the major benefits are attained by customers who are driving a significant distance per day;

4. investments required in the captive financing subsidiary could be higher than expected;

5. additional investments may be required in PMAG to support it financially;

6. exports recovery continues to be gradual. That said, the negatives could be partially offset by better operating leverage.

We value the company’s core business at 21x Mar-27 EPS, and via SOTP valuation reach a target price of Rs 8,184. We maintain Reduce.

Deepak Nitrite - Increase in capex to elevate debt level

We maintain Sell on Deepak Nitrite Ltd., with a price target of Rs 1,676. Deepak Nitrite is venturing into polycarbonate manufacturing with an investment of Rs 50 billion and is also expanding into polycarbonate compounding. The PC plant shall commence operation by FY28-end and start contributing to revenue from FY29. Additionally, the company will invest Rs 35 billion for setting up a PC intermediate plant (Bisphenol A) and an additional phenol capacity.

However, the balance sheet will become debt-ridden (from being debt-free) with a peak net debt to equity of 0.7x and net debt to Ebitda of 2.1x in FY28. The RoCE will remain ~13% over the next four years while RoE will remain below 20% until FY29.

The stock is trading at 29/23x FY26E/27E. Ebitda/APAT were 39%/53% above our estimates, owing to higher -than-expected revenue.

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