NEW DELHI: Despite bullish market sentiment, shares of Bajaj Auto declined nearly 3 per cent in morning trade on Monday even after the company reported better-than-expected financial results for the quarter ended March 31.The two-wheeler maker on Friday posted 20.90 per cent year-on-year (YoY) rise in standalone profit at Rs 1,305.59 crore over Rs 1,079.87 crore in the same period last year.
Standalone revenue from operations jumped 8.94 per cent to Rs 7,395.19 crore from Rs 6,788.42 crore in the year-ago period.
The company's board has recommended a dividend of Rs 60 per share.
The company, analysts said, may witness pressure on volume growth due to regulatory cost push, shrinking rural market income and tight liquidity in the current year.
Furthermore, the inventory level rose to 55 days, higher than normal for the March quarter.
That could restrict volume growth in the first quarter of this financial year.
Dalal Street is penciling in volume growth of 4-5 per cent.
Global brokerage Nomura maintained 'neutral' rating on the stock with a target price of Rs 2,901, highlighting that it expects the continuation of aggressive market share gain strategy in FY20.
Kotak Securities retained a 'reduce' rating on the stock with a target price of Rs 2700, underscoring its concerns on declining Ebitda margin.
The brokerage expects the volume of the two-wheeler industry to be weak over the next two years.
Motilal Oswal Securities too has a 'neutral' recommendation on Bajaj Auto, with a target price of Rs 3,050.
"With down step in margins, clarity on the build-up of cash war chest and increase in the promoters stake behind us, we see limited re-rating triggers for the stock," the brokerage said.With valuations at nearly 17.5 times for FY20 and 16 times for FY21, consolidated earnings per share (EPS) is a fair reflection of the tepid earnings growth expectation (nearly 7 per cent CAGR over FY19-21E), considering the likely turbulence due to BS6 transition, the brokerage added.The stock traded 1.59 per cent lower at Rs 2,993.45 around 10 am on BSE.