INSUBCONTINENT EXCLUSIVE:
Bajaj Auto is Rs 2,602.70.Yes Securities has a buy call on Bajaj Auto with a target price of Rs 3,200.
The current market price of Bajaj
Auto is Rs 2,602.70.
Time period given by the brokerage is one year when Bajaj Auto price can reach the defined target
Investment rationale by the brokerage-Margins to improve, valuations attractive: Bajaj Auto expects significant improvement in margins
This would be driven by (1) substantial improvement in Rupee realization to Rs71/$ as compared to Rs 68.9/$ in Q3 FY19, (2) higher share of
Platina that would lead to breaking even of M1 category for Bajaj Auto, (3) the recent decline in commodity prices and (4) hike in prices of
CT100 back to the pre-discount levels in some markets
Over the next couple of years, the company expects domestic volumes to witness 8-10 per cent volume growth and export volumes to see 10-12
Considering this, we expect Bajaj Auto to report a FY18-21E earnings CAGR of 13.7 per cent
FY21E P/E of 12.1x appears attractive
We assign a BUY rating with a 1-year price target of Rs 3,200.
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