Hi CB, Stock: Buy Bajaj Auto Ltd
Current Price: Rs. 2099
Investment Horizon: 90 days
from report date
Close Date: 13 July 2015
Target Price: Rs. 2400
Expected Returns: 14.34%

About Bajaj Auto Ltd

Bajaj Auto Ltd (BAJAUT) is the second largest two-wheeler manufacturer in India with a domestic market share of 20%. It offers products in all motorcycle segments-Platina (entry), Discover (executive) and Pulsar (premium). It is also the largest three-wheeler manufacturer in India. Post the demerger in May 2008, BAJAUT has been solely focused on the automobile business. In the past few years, the company has shown strong growth in exports that now forms nearly 40% of its total volumes.

5 Reasons why you should invest in BAJAUT

1. Two-wheeler penetration in India is currently low:

Two-wheeler penetration in India is currently low compared with comparable countries. In the coming years, penetration is expected to rise driven by growing disposable incomes, favorable demographics, better availability and penetration of financing, and increasing availability of product choices. With BAJAUT being the second largest two-wheeler manufacturer in India is likely to benefit significantly from the same.

2. Domestic 2W: Setting ambitious market share target in motorcycles

BAJAUT is upgrading the Platina platform (entry segment) after almost 9 years. The company is expanding the portfolio with a self‐start option (~50% of entry segment). Pulsar (premium segment) will see expansion in product portfolio. In Q4FY15 and Q1FY16, 200cc and 400cc products will be introduced. A new brand between Platina and Splendor (Hero) will also be launched. These factors have made earnings outlook favourable for BAJAUT compare to its peers.

3. BAJAUTO retains its leadership position in the three-wheeler segment

BAJAUTO retains its leadership position in the three-wheeler segment despite launches by competitors, notably TVS Motors and M&M. With various cities such as Chennai getting more liberal with issuing new permits, we expect demand to grow steadily. In addition, the company will be launching new products, upgrading technology and expanding its dealer network. We estimate total three-wheeler volumes to post growth of 12% in FY16E on increasing penetration in rural and undeveloped export markets.

4. Exports: Strong potential; can double in 5 years

BAJAUT is looking to expand exports (currently 40% of total volumes) by gradually increasing penetration in Africa and South East Asia through improved dealer network and brand visibility. Strategically, BAJAUT aims to increase the proportion of exports to 50% of total volumes. Despite near‐term concerns (currency/macro environment), management is confident of robust demand from exports markets.

5. Attractive valuations

Bajaj Auto is a diversified play with domestic motorcycle, three wheeler and export portfolio. Whilst Africa continues to drive exports growth, new launches in domestic segment are likely to create excitement in the domestic market. Cut in interest rates are positive for premium bikes demand where Bajaj auto is the largest player. The stock trades at P/E of 14x on FY17E.

Hi cb sir... Should I buy idfc or Pnb at this level for short term.. Ur view for both stock at this level for short term...

HI ASHOK .V (ji ) Try to put any specific image for easy identification .& I (We) wait & Missed ur shorterm calls. Monday I will try to add some of TVS Ele & CCHHL. tq

(Hi CB , Sorry for a comment without your permission. Tq.)

CB sir jindal stainless already touched 39.40 ..whats the target for short term ??

Hi Ashok V., Thanks for your guidance to us. Here,most of us are small traders, so fear to enter newcomer's trade.
As Mr NIZ suggested, keep on sharing knowledge and people will start recognizing you.
Thanks
Hi Mrp, Why are somebody putting a sorry note to CB Sir for writing without his permission? I don't think he has any problem if we address to anyone here. :-)

Sir market sentiments for monday ?

Hi rajendra, can test 15

Hi Deepak, seems may open 40-50 points higher

Hi Thomas, not really sure of entering these stocks

Hi JC, can test 44 in near term

Hi Nikhil, dont add more of it yet. its a hold for now. above resistance of 162 can move higher

Hi Mrp, please feel free to

Hi prasad, can go with idfc for now. looks stronger

Hi Tejas Gupta, thanks.

Hi CB Sir, your view on NDTV.