Buy Bajaj Auto; target of Rs 4197: Motilal Oswal
Motilal Oswal’s research report on Bajaj Auto
Regulatory changes in key states where BJAUT enjoys over 90% share are opening up an incremental opportunity of ~142k passenger 3Ws (v/s sales of 240k in FY17). Average monthly volumes in FY18YTD have improved to ~24.7k (v/s ~21.1k/month in FY17). Strong domestic demand coupled with recovery in 3W exports is leading to capacity constraints for BJAUT in the 3W business.
Valuations at 17.4x FY19E and 15x FY20E consolidated EPS are attractive. We shift our valuation methodology from SOTP-based to valuing at consolidated earnings while maintaining our earnings estimates. We value BJAUT at INR4,197 (20x December 2019E consolidated EPS). Maintain Buy.
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