scorecardresearchBajaj Auto: Domestic market drives April sales; brokerages advise buying,
Global brokerage firm Jefferies has retained its 'buy' call on the stock and raised its target price to  <span class='webrupee'>₹</span>5,100 apiece from  <span class='webrupee'>₹</span>4,800 earlier.

Bajaj Auto: Domestic market drives April sales; brokerages advise buying, see up to 14% upside

Updated: 05 May 2023, 08:25 AM IST

Analysts expect that Bajaj Auto will benefit from the launch of new motorcycles that are jointly developed with British bike maker Triumph, as well as an increase in production of its electric scooter Chetak.

Shares of Bajaj Auto, a leading two-wheeler manufacturer and the flagship company of Bajaj Group, have been performing well on exchanges. After a decent finish with an 11.30% gain in CY22, the stock continued the same magnitude in 2023 and has so far gained 23.34%, growing steadily from 3,617 apiece to 4,459.

In the current year so far, the stock has outperformed the Nifty Auto index by 18.01%, which has yielded a return of 5.33%. Additionally, it has been ranked as the second top gainer in the index.

The company's shares have been on a continuous uptrend since March 28th, with no significant pullbacks. On May 02, the stock climbed by 1.70% in intraday trade to mark a new record high of 4,506. This strong show is attributed to decent financial performance, an improvement in sales, and positive market sentiments for the automobile industry.

Stock Price Chart of Bajaj Auto
Stock Price Chart of Bajaj Auto

Going forward, analysts expect that Bajaj Auto will benefit from the launch of new motorcycles that are jointly developed with British bike maker Triumph, as well as an increase in production of its electric scooter Chetak.

Domestic market drives Bajaj Auto's April sales

On Monday, the leading two-wheeler major reported a 7% YoY increase in total sales, recording 3,31,278 units in April 2023 as compared to 3,10,774 units in the same month of 2022. The total two-wheeler sales witnessed a 2% YoY growth with 2,87,985 units sold in April 2023 as against 2,81,711 units sold in April 2022.

In the domestic market, two-wheeler sales were significantly higher with a growth of 95%, selling 1,81,828 units last month as compared to 93,233 units in April 2022. However, the export market saw a 44% decline in sales, with 1,06,157 units sold in April 2023, compared to 1,88,478 units sold in the same month last year.

The company's commercial vehicle sales also surged, increasing by 49% to 43,293 units in April 2023 from 29,063 units in April 2022. In the domestic market, commercial vehicle sales performed well, growing 3.5-fold to 31,344 units from 8,944 units in the same month of the previous year.

However, the export market for commercial vehicles experienced a decline in sales, falling by 41% to 11,949 units in April 2023 from 20,119 units in the corresponding period of the previous year.

Building for the future

Bajaj Auto announced its plan to strengthen its Electric Vehicle (EV) capabilities. The company aims to increase the volume of its electric 2-wheeler (E2W) model, Chetak, to 10,000 units by June.

To cater to its EV portfolio, Bajaj Auto is establishing a separate dealer network and plans to expand Chetak's availability to 120 cities by September from the current 85 cities.

The company also completed testing of E-3W and plans to do a limited launch of passenger and cargo vehicles.

Launch of Triumph bikes

In a joint statement released on April 10, 2023, Triumph Motorcycles Ltd., a UK-based company, and Bajaj Auto announced the successful completion of the transfer of Triumph India's sales and marketing operations to Bajaj Auto.

This move is part of the strategic partnership between the two companies, which was announced in 2020 with the aim of creating a new range of mid-sized Triumph motorcycles.

Bajaj Auto will now manage the current 15 Triumph Motorcycle dealerships, which will remain exclusive to the brand and operate in accordance with Triumph's global standards.

The partnership also involves the joint development and production of new mid-sized Triumph motorcycles at Bajaj Auto's Chakan plant in Maharashtra. In addition, Bajaj Auto plans to open Triumph dealerships in over 120 cities in the next two years, in line with Triumph's global standards.

Decent performance for March Quarter

In the fourth quarter ended March 31, 2023, the standalone net profit of the company saw a marginal decline of 2.45% to 1,433 crore. In the same quarter last year, the company had recorded a net profit of 1,469 crore.

However, for the full fiscal year 2022–23, standalone PAT increased by 12% to 5,627.60 crore compared to 5,018.87 crore in FY22.

The company's total revenue from operations rose to 9,319 crore in the March quarter, up from 9,022 crore in the year-ago period. Furthermore, its revenue from operations in FY23 increased by 10% to an all-time high of 36,428 crore.

The operating profit witnessed a significant increase of 26% year-on-year to 1,718 crore in Q4, with margin accretion of 220 basis points to 19.3%.

The company reported that the domestic motorcycle sales during the quarter continued to perform well, driven by the strong performance of the Pulsar portfolio and further scale-up in Platina 110 ABS volumes.

Brokerage views

"Bajaj Auto is seeing strong performance in the domestic 2W and 3W segments. The strong growth bias towards 125cc+ 2W is helping the margin profile along with the higher sales of domestic 3W. The strength of domestic business has cushioned the numbers from the severe reduction in export volumes," said brokerage firm KR Choksey.

“We continue to like the diversification benefits that come with BJAUT. The scale-up in EV 2W and the foray in EV 3W, in addition to the commencement of Triumph sales, are some of the things to look out for in FY24E,” it added.

“However, we think uncertainties in the form of export volumes will take longer to resolve as they are linked to the macro environment in BJAUT’s target export markets and the availability of USD for trade, "the brokerage said.

Considering the uncertainty of the timing of exports recovery, possible stagnancy of margins, and the run-up in share price, the brokerage has reduced its recommendation to 'Accumulate' from the 'Buy' rating on the stock with a target price of 4,756 apiece.

On the other hand, global brokerage firm Jefferies has retained its 'buy' call on the stock and has raised its target price to 5,100 apiece, indicating an upside of 14.42%.

"While we are concerned about Bajaj's market share loss in premium bikes and exports, we see multiple tailwinds, including improving domestic demand, gradual export recovery, the launch of Triumph bikes, and the scale-up of EVs," said the brokerage firm.

Meanwhile, ICICI Securities has maintained its 'add' rating on the stock and increased its DCF-based target price to 4,563 per share from the earlier price of 4,051.

43 analysts polled by MintGenie on an average have a 'buy' call on the stock.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.


Electric two-wheeler makers
Electric two-wheeler makers
First Published: 05 May 2023, 08:25 AM IST