Market’s Favourite Auto Stock : Bajaj Auto, the flagship company of Bajaj Group, is a two-wheeler and three-wheeler manufacturing company that exports to 70+ countries across several countries in Latin America, Southeast Asia, and many more. Its headquarter is in Pune, India. It has acquired 48% of the KTM Brand which manufactures sports and super sports two-wheelers, which was 14% in 2007 when the company first acquired KTM. Bajaj Auto had set up an assembly line capacity in its Waluj plant in Aurangabad, Maharashtra, to manufacture quadricycles (branded as Qute), which it started exporting apart from catering to the domestic market. The company has a total capacity to manufacture 54 lakh units of motorcycles and 9.3 lakh units of commercial vehicles (passenger carrier, goods carrier, and quadricycles) at its plants in Waluj and Chakan in Maharashtra; and Pantnagar in Uttarakhand.
Valuation : While significant challenges exist on supply side and commodity prices for the auto segment as a whole, with easing of trade activities across most countries and even domestically, we expect margins to gradually improve on new product launches and better product mix. Hence, we recommend a BUY rating in the stock with the target price (TP) of Rs.4284, 22x FY22E EPS.
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