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Bajaj Auto reports Q2 earnings: Time to buy, sell or hold the stock?

The automaker's market capitalisation stood at Rs 88,297 crore. The stock trades higher than 5, 20, 50, 100 and 200-day moving averages

twitter-logoBusinessToday.In | October 23, 2020 | Updated 16:26 IST
Bajaj Auto reports Q2 earnings: Time to buy, hold or sell the stock?
Bajaj Auto stock has risen 2% in the one month, although declined 4.2% since the beginning of the year

Shares of Bajaj Auto Ltd were trading 1.5% higher on Friday even as the two-wheeler maker reported a 19% YoY fall in its net profit for the quarter ended Sept 30, 2020.

Company's net profit declined 19% year-on-year to Rs 1,138 crore, while its revenue from operations declined 7.2% YoY to Rs 7,156 crore in Q2FY21, as total sales volume fell 10% to 10.5 lakh units.

Shares of the two-and-three-wheeler maker touched an intraday high of Rs 3,055, rising 1.5% against the closing price of Rs 3,009.25 on BSE. The stock also touched an intraday low of Rs 2997.55, after opening at Rs 3,012.10.

Bajaj Auto stock has risen 2% in the one month, although declined 4.2% since the beginning of the year. The automaker's market capitalisation stood at Rs 88,297 crore. The stock trades higher than 5, 20, 50, 100 and 200-day moving averages.

HDFC Securities said in its note, "Realization for the quarter came in at Rs 67,935 per unit as compared Rs 65,673 per unit. EBITDA decreased marginally to Rs 1,266.2 crore from Rs 1,278 crore while EBITDA margin expanded by 110 bps YoY to 17.7%".

Kotak Institutional Equities in its report said," Bajaj Auto reported 2QFY21 EBITDA of Rs12.7 bn (-1% YoY), which was 4% above our estimates led by (1) optimization of fixed cost and (2) improvement in profitability in the domestic 2W segment led by a richer product mix. We like the fact that the company is able to maintain operating margins in these challenging times as well. Bajaj Auto remains our top pick given the strong long-term growth potential in export geographies where the company has already established itself as a formidable player."

The brokerage has maintained BUY with an unchanged face value of Rs 3,900 per equity share.

Emkay Research in its report post-earnings announcement said," Demand prospects are improving, with domestic 2Ws at ~90% of normal levels in Q2 and recording flat growth in initial days of the festive season. Export volume saw double-digit growth in Sep'20 and is expected to further increase in Oct-Nov'20. Valuations are attractive (15x/13x FY22/23E EPS) in comparison with the historical multiples of 17.5x."

The brokerage has reaffirmed 'Buy' rating with a revised TP of Rs 3,976 for Bajaj Auto stock, based on 17x FY23E EPS (Sep22E earlier) and value of KTM at Rs102/share.

JM Financial Institutional Securities in its stock report said," Given the successful track record of product intervention by BJAUT in last few years and strong exports outlook, it is best placed to navigate the uncertainty surrounding the extent of festive demand. We estimate revenue / EPS CAGR of 9% / 11% over FY20-23. The slowdown in the domestic market, second wave of COVID-19 and sharp INR appreciation remain key risks."

The brokerage has maintained BUY rating for the stock with revised Sep'21 TP of INR 3,350 (15x fwd earnings).

BOB Capital Markets said," We remain cautious and continue to model for a muted 3% earnings CAGR for the company during FY20-FY23.

The brokerage added that its Sep'21 target price for Bajaj Auto stock stays unchanged at Rs 2,750, set at 15x one-year forward EPS, with rating maintained at Sell.

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