Bajaj Auto share price rallies 4% to hit 52-week high after strong Q2 results; Should you buy?

Bajaj Auto shares rallied over 4% to hit a 52-week high in early trade on Thursday after the company reported its Q2 results. Bajaj Auto share price rose as much as 4.85% to ₹5,393.30 apiece on the BSE. 

Auto major Bajaj Auto reported a standalone net profit of ₹1,836.14 crore in the second quarter of FY24, registering a growth of 20% from ₹1,530 crore in the year-ago period.

The company’s revenue from operations in Q2FY24 increased 5.6% to ₹10,777.27 crore from ₹10,203 crore in the corresponding period last year. 

The revenue growth was underpinned by double digit volume growth, with the sustained buoyancy on the domestic front cushioning the weak, albeit improving exports performance, Bajaj Auto said in a statement.

At the operational level, EBITDA during the quarter rose 21.3% to ₹2,132.8 crore from ₹1,758 crore, YoY, while EBITDA margin expanded by 260 bps to 19.8% from 17.2%, YoY.

Read here: Bajaj Auto posts 5% rise in Q2 revenue at ₹10,777.27 crore

Here’s what brokerages have to say on Bajaj Auto’s Q2 results and stock price:

Nuvama Institutional Equities

Bajaj Auto posted healthy Q2FY24 EBITDA and PAT, broadly in line with expectations. The two-wheeler volume prospects remain positive, and we expect 7% CAGR over FY23-26E, led by continuing domestic growth and recovery in exports. However, a recovery in exports could be gradual, and depends on economic conditions and USD availability in Africa/Asia markets, Nuvama Institutional Equities said. 

It believes the company would underperform peers such as TVS Motors, owing to its weak presence in scooters and its large exposure to overseas markets. 

The brokerage firm retained ‘Hold’ rating and raised the target price to ₹5,380 per share from ₹5,100 earlier, based on an uptick in FY24E/25E EPS by 3% each, factoring in higher realisations and margins.

Motilal Oswal Financial Services

The brokerage expects Bajaj Auto’s domestic and export volumes to recover in FY24 from the low base, driving a healthy earnings recovery. It expects the company to benefit from market share gains over the long term, driven by the premiumization trend, the opportunity in exports, and the potential sizeable position in the Scooter market via EVs.

However, a large part of its India profit pool (of premium motorcycle and 3Ws) is vulnerable to possible disruption from electrification, it noted.

The brokerage reiterated its ‘Neutral’ rating on the stock with a target price of ₹5,225 per share.

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Kotak Institutional Equities

Bajaj Auto reported 2QFY24 EBITDA of ₹21.3 billion, in line with our estimates, as better-than-expected gross margins were offset by lower-than-expected realizations. We expect a recovery in domestic and gradual volume growth in export 2W industry; however, downside risk persists (exports) given an uncertain macroeconomic environment and geopolitical tensions. In our view, current profitability trends are likely to reverse partly, as the mix normalizes, Kotak Institutional Equities said.

The brokerage maintained ‘Sell’ rating on the stock as most positives are priced in at CMP. It raised the target price to ₹4,500 per share from ₹4,350 earlier.

Antique Stock Broking

Bajaj Auto posted a decent set of numbers; while revenue was in line with our estimates, margins came ahead of our estimates. We anticipate the domestic volume growth to be in line with the industry growth over the next two years, supported by new model launches. In terms of profitability, we believe going ahead and as the share of E2Ws and exports go up, we will see some correction in margins, said the brokerage. 

It raised FY24 and FY25 EPS estimates by 3% and 1% and retained ‘Hold’ rating with a target price of ₹5,543 per share.

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SMIFS 

According to brokerage firm SMIFS, Bajaj Auto’s good operational performance led to a slight beat on its PAT estimates, while margin improvement was higher than estimates largely driven by better than expected benefits of soft commodity prices & mix impact.

The outlook on exports & domestic market recovering is reasonably good with stability in the margin profile. A few new launches/upgrades across 2W/3W/EVs along with ramp-up in Triumph/Chetak volumes will support in growing better than the market,” said the brokerage.

It has marginally upgraded EPS by 3% and 2% for FY24 and FY25 respectively owing to a superior improvement in operational performance. The brokerage maintained ‘Accumulate’ rating with a revised target price of ₹5,645 per share.

At 9:25 am, Bajaj Auto shares were trading 4.36% higher at ₹5,368.00 apiece on the BSE.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.