Nuvama Institutional Equities has issued a buy call on the world’s most valuable two-wheeler and three-wheeler company, for a potential upside of 26 percent.
With a market cap of Rs. 2.65 lakh crore, Bajaj Auto Limited has delivered positive returns of nearly 94 percent over the past year, and so far in 2024, it has also shown gains of around 42 percent
Brokerage Target
Nuvama Institutional Equities has maintained a ‘buy’ recommendation on Bajaj Auto and increased its target price to Rs. 12,000 per share from the previous target of Rs. 10,340, after Bajaj Auto launched the CNG-powered Freedom 125 motorcycle, which is the world’s first CNG-integrated two-wheeler.
The new price target of Rs. 12,000 per share suggests a potential upside of nearly 26 percent from Bajaj Auto’s current trading price of Rs. 9,499.6.
Brokerage Outlook
According to the 5th July regulatory filings with the stock exchanges, Bajaj Auto has launched the world’s first CNG-powered motorcycle, Freedom 125. This new bike offers up to 50 percent lower operating costs compared to similar internal combustion engine (ICE) motorcycles.
As per the brokerage firm Nuvama, the Bajaj Freedom 125 CNG is expected to see strong sales volumes, reaching 10,000 units per month in the second half of fiscal year 2024-25 and 20,000 units per month in fiscal year 2025-26.
Nuvama believes the CNG model will provide better cost of ownership for customers compared to petrol motorcycles, making it attractive for cost-conscious buyers. The firm expects Bajaj Auto to adapt this CNG powertrain technology for multiple engine displacements going forward.
Overall, Nuvama forecasts Bajaj Auto to deliver a revenue CAGR of 12 percent and EBITDA CAGR of 15 percent over the FY24-26 period, with an average return on equity of 35 percet during the same time.
Financials:
Bajaj Auto saw a 30 percent year-on-year increase in revenue from operations, climbing from Rs. 8,661 crore in Q4 FY22-23 to Rs. 11,249 crore in Q4 FY23-24. Additionally, after-tax profits grew by 18 percent from Rs. 1,704.7 crore to Rs. 2,011.4 crore, during the same period.
On a year-on-year basis, the Earnings Before Interest, Taxes, Depreciation, and Amortisation, or EBITDA increased from Rs. 1,718 crore in Q4 FY22-23 to Rs. 2,307 crore in Q4 FY23-24, representing a growth of 34 percent.
Shareholding Pattern:
As of March 2024, the shareholding pattern of Bajaj Auto shows that the Promoters hold a majority stake of 55.06 percent, while the Foreign Institutional Investors (FII) hold a 14.52 percent stake in the company. The Retail Investors and Domestic Institutional Investors (DII) hold a 21.88 percent and 8.54 percent stake, respectively.
About the Company:
Bajaj Auto Limited is engaged in the business of development, manufacturing and distribution of automobiles such as motorcycles, commercial vehicles, electric two-wheelers etc. and parts thereof, and sells its products in India as well as in various other global markets.
Written by Shivani Singh
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