Shares of a large-cap automobile company gained 5.15 per cent on Friday’s early trades to hit a record high of ₹ 5,093.95 apiece on the National Stock Exchange (NSE), after BofA Securities upgraded the stock to buy. 

According to reports, BofA Securities has upgraded Bajaj Auto to ‘Buy’ from ‘Neutral’ and has revised the target price to ₹ 5,550 from ₹ 5,100 earlier. This translates to an upside of 7.60% as compared to its current share price. Bajaj Auto’s shares settled at ₹ 4844.50 apiece on Thursday and witnessed a rally after the upgrade.

The brokerage in a note said that all the segments of the company are well positioned for positive growth in FY25. It expects a 14-15 per cent revenue compound annual growth rate (CAGR) over FY23–26. Moreover, it said that the company’s business model is quite well positioned, with both cyclical and structural drivers at play. Its exports finally seem to be inflecting, it said. 

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Bajaj Auto’s total vehicle sales, including the sale of commercial vehicles, declined 15 per cent to 3,41,648 units in August 2023, compared to 4,01,595 vehicles in August 2022. Its total domestic sales dropped 20 per cent to 2,05,100 last month, as compared to 2,56,755 units in August 2022. The company’s total vehicle exports fell 6 per cent year-on-year to 1,36,548 units in August from 1,44,840 units shipped to the overseas markets in the year-ago period, it said. 

However, the company reported a 41.89 per cent year-on-year (YoY) rise in its consolidated net profit at ₹ 1,664.77 crore for the quarter ended June 30, 2023 (Q1FY24), compared to ₹ 1,173.30 crores in the corresponding quarter last year (Q1FY23). Its revenue climbed 28.79 per cent to ₹ 10,309.77 crores in Q1FY24, compared to ₹ 8,004.97 crores in Q1FY23. 

The automaker said that its revenue growth was on the back of double-digit volume growth, with sustained buoyancy on the domestic front cushioning the weak exports. 

With a market capitalization of ₹ 1,37,012 crores, Bajaj Auto is a large-cap company. It has a high return on equity of 26.70 per cent and an ideal debt-to-equity ratio of 0.00. Its shares were trading at a price-to-earnings ratio (P/E) of 20.95, which is lower than the industry P/E of 24.83, indicating that the stock might be undervalued as compared to its peers. It has a dividend yield of 2.89 per cent. 

The company’s promoters hold a 54.99 per cent stake in it, followed by retail investors with 22.80 per cent, foreign institutions with 13.67 per cent and other domestic institutions with 4.79 per cent and mutual funds with 3.75 per cent. 

Written by Simran Bafna 


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