Buy Bajaj Auto:532977 at CMP of Rs 2690 one year target Rs 3300

Bajaj Auto is world’s 3^rd largest manufacturer of  motorcycles  and largest three wheeler manufacturer  having  around 60% market share. It has 3 manufacturing units

1.Pune

2.Aurangabad

3.Pant Nagar

Performanace-2017-18

Net sales in 2017-18 increased by 15.6% — the highest ever for your Company.

During the year, motorcycle exports grew by 14.5%, Company sold 1.39 million bikes

Commercial vehicle exports increased by 39% to over 267,000 units,

In FY2018, exports fetched Bajaj Auto and the country US$1.36 billion in revenues — up by over 25%

In FY2018, Bajaj Auto’s domestic three-wheeler sales broke records to reach an all-time high of 369,637 units, representing a volume growth of 46% over FY2017.

Overall Bajaj Auto – recorded its highest ever operating income and profit after tax in FY-2017-18

	Q-1 17-18	17-18	Q-1  18-19	Growth Q on Q	18-19(E)	Growth %
Sales-Crs	5,854	25563	7419.2	26.73%	30050	17.5
other income	323.5	1213	310.00	-4.16%	1200	-1.05
Net profit	837	4219.	1041.7	24.50%	4800	13.77
Equity	289.37	289.37	289.37	0.00%	289.37	0
NPM%	14.29	16.50	14.04	-1.76	15.97	-3.22
EPS	28.90	145.8	36	24.57%	165.88	13.8

Inspite of excellent results stock price of BAL has come down to create 52 weels’s low of Rs 2604 against the52 week high of 3472 created in Feb-2018 and has not participated in recent rise in index.

Major reason which could be major reason for the downfall  is recent price discount policy initiated by management to increase market share which has not gone well with analyst community and very fear of reduction in margins and profitability initiated the downgrade.

But if we look at April-July(18-19) sales figures reported by management in comparison to April-July-(2017-18) the numbers are very encouraging and it makes us believe that management’s conviction and plan is working to increase market share with minor reduction in profit margin.

Motorcycle sale no.	Apr-July-2018	April July-2017	Growth
Domestic	795667	591477	35%
Export	566977	449419	26.00%
Sub Total-A	1362644	1040896	31%
Commercil Vehicles
Domestic	130509	73929	77%
Export	133831	81336	65%
Sub Total-B	264340	155265	70%
Total MC+CV
Domestic	926176	665406	39%
Export	700808	530755	32%
Total MC+CV	1626984	1196161	36%

In lieu of analyzed sales number and revenue achieved in Q-1-2018-19 it is estimated that company is in good position to achieve approx 18% growth in overall sales resulting in EPS of approx 165 .At a PE multiple of 20 stock has potential to touch Rs 3300.Good monsoon and festival season in next quarter can fuel rural and general demand for 2 wheelers and 3 wheelers, sentiments is expected to remain positive till Deepawali  and the assigned target price may be achieved around Deepawali .

Investors can start accumulating this blue-chip for decent gains in short/long term.