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Prabhudas Lilladher Report
We marginally increase our FY24/25 earnings per share estimates of Bajaj Auto Ltd. by 2-3% to factor beat in margins and management commentary.
Bajaj Auto's Q1 revenue (Rs 103 billion) was largely in-line, while Ebitda margin (19.0%) was higher than our estimate (18%) but in-line with street estimates (19%).
Ebitda margins saw slight decline QoQ on de-inventorisation, inferior mix and better vehicle mix, offset by higher operating leverage. However, strong cost control of employee expenses and other operating expense, shielded from a steeper decline.
Export volumes recovered QoQ and Bajaj Auto is expecting gradual improvement, given macro challenges in those markets.
The company will also face increasing pressure from inferior mix as the export portfolio from African regions begins to increase (higher mix of low margin products) plus increase in electric vehicle volumes and margins are likely to remain at current levels.
Q2 volumes in domestic market could be soft due to high base. We expect Bajaj Auto's domestic premium segment volumes to grow (similar to the industry) helped by premiumisation trends besides fast ramp-up of EVs could make us turn constructive on the stock.
Bajaj Auto is currently trading at 17.4 times FY25, on the higher side versus history.
Maintain ‘Reduce' with a target price of Rs 4,575 (Rs 4,450 earlier) at 16 times March-25E earnings per share.
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