Alpha | Bajaj Auto Ltd.- Equity Research Desk

Bajaj Auto Ltd. – Market’s Favorite 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 Latin America, Southeast Asia, and many more. It headquarters 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 57.2 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:

As the company, currently has higher exposure to export markets, there are challenges in terms of rising inflation, global recession, currency devaluation and higher interest rates. However, domestic 2W segment has witnessed some recovery on the back of normalcy from covid phase i.e., opening up of offices, revenge travel, etc. We expect this trend to continue, as the semiconductor issue is now easing out. Hence, we recommend an ACCUMULATE rating in the stock with the target price (TP) of Rs.4120, 15x FY24E EPS.

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