The recent depreciation of Rupee versus USD will likely improve Bajaj Auto’s Ebitda margin as well as its competitiveness in export markets. We have increased our earnings estimates by 5-8% after factoring in the change in our currency assumptions. However, we maintain our Sell rating due to deteriorating profitability in the domestic motorcycle segment. Increase target price to Rs 2,700 (from Rs 2,500 earlier).
Shares of Bajaj Auto were up by 3% at Rs 2,875 per share on the BSE in an otherwise weak market after the company announced its plan to expand 3 wheelers & quadricycle capacity to 1 million per year as Government announced an end to permits.
At the Society of Indian Automobile Manufacturers (SIAM) convention on Thursday, the Minister for Transport,
Bajaj Auto may have reported a 39% year-on-year increase in its domestic sales in the three months to June, but analysts are concerned about the Pune-headquartered firm’s profitability, given it has triggered a price war.
The Bajaj Auto stock has lost 4% over the last one month and 9% over the last six months. The stock closed Tuesday’s trading session at Rs 2,727.55 on the BSE, down 0.24% over Monday’s close.
Mumbai: India’s motorcycle market is set to witness a new round of competitive intensity as Bajaj Auto Ltd prepares to grow its share in the market for entry-level and premium motorcycles, according to analysts. Bajaj’s push for market share growth is already consuming its profit margins but the Pune-based company is undaunted and has set greater ambitions with aggressive product pricing, the analysts told Mint.
The race for the No. 2 motorcycle manufacturer in the domestic market is almost mirroring a see-saw battle between Bajaj Auto and Honda Motorcycle and Scooter India (HMSI) since the beginning of FY18 and the battle continues on the same lines in the current fiscal also. The country’s annual 20-million-unit-strong motorcycle market has three major players — Hero MotoCorp with a market share of 51.5%, followed by Bajaj Auto at 15.6% and HMSI at 15.5%.
A robust growth in motorcycle and commercial vehicle volumes drove Bajaj Auto’s net profit by 21 per cent to Rs 11.15 billion in the April to June quarter, against Rs 9.24 billion a year ago. The net was lower than Rs 12.5-billion estimated by Bloomberg analysts. The company’s revenue rose 26.7 per cent to Rs 74.19 billion over a year-ago period, missing the consensus forecast of Rs 77.91 billion, too.
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