KRChoksey bullish on this large-cap stock, sees over 40% upside

Brokerage house KRChoksey has maintained its bullish stance on Bajaj Auto Limited (BAL) and has a target price of Rs 4,710 per share. The revival is on the cards and the growth prospects remain positive for the company, it said in its recent report.   KRChoksey noted that the company continues to maintain its strong market position in the two-wheeler segment led by exports and the premium motorcycle segment. As economic activities continue to revive, BAL is expected to see a swift recovery in domestic sales led by its premium portfolio, it said.   The stock opened a tad higher at Rs 3359.95 against the previous close of Rs 3357.80 on BSE. With a market capitalisation of more than Rs 97,000 crore, the shares stand higher than 5 day and 20 day moving averages but lower than 50 day, 100 day and 200 day moving averages.   The brokerage house highlighted that Bajaj Auto has positioned itself strongly in export markets with a focus on Nigeria, Bangladesh, Philippines, and Colombia, which account for 50 per cent of its two-wheeler export revenue.   In 3W exports, Bajaj Auto has a strong presence in Nigeria, Egypt, Cambodia, and Iraq. Products are well diversified, and Bajaj Auto has a favorable sales mix in underpenetrated markets such as Africa. The company has improved its brand equity in these markets, which will help to improve its market share, it added.   KRChoksey said that the key focus area for Bajaj Auto would be on capturing market share and the company is positive on demand outlook from overseas market. However, it noted that the company may face supply side constraints due to the current pandemic situation in India. Also, it is already facing cost pressure due to higher commodity prices which may continue in H2FY22.   "Since our last recommendation, the stock price of Bajaj Auto has significantly corrected by 12.5 per cent from Rs 3,840 to Rs 3,359 per share. We assign a P/E multiple of 23x on FY24E EPS of Rs 205 to arrive at a target price of Rs 4,710/share; implying an upside potential of 40.2 per cent from the current market price," KRChoksey said.   Bajaj Auto released the sales figure for December on Monday. While commercial sales saw a growth of 29 per cent, two-wheeler sales dropped 6 per cent year-on-year, leading to an overall drop in the sales figure of 3 per cent in December.    The company clocked domestic sales of 1,27,593 units for two-wheelers in December, as against 1,28,642. It exported 1,91,176 units in the same month, as against 2,09,942 units, which is a drop of 9 per cent. Overall, Bajaj Auto clocked two-wheeler sales of 3,18,769, as against 3,38,584 units.   As for commercial vehicles, Bajaj Auto clocked domestic sales of 18,386 units, as against 10,964 in December 2020, which is a jump of 68 per cent. It exported 25,315 units of commercial vehicles, as against 22,984 units, an increase of 10 per cent. Overall, it saw an increase of 29 per cent year-on-year, from 33,948 units in December 2020 to 43,701 units in December 2021.