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Finquest Securities
Bajaj Auto (Buy)
CMP: ₹2,210
Target: ₹2,656
The Bajaj group’s flagship company, Bajaj Auto, is ranked as the world’s fourth largest two- and three-wheeler manufacturer and the Bajaj brand is well-known across several countries in Latin America, Africa, West Asia, South and South East Asia. Founded in 1926, at the height of India’s movement for independence from the British, the group has an illustrious history.
Bajaj Auto’s (BAL) launch of the new brand “V” could really be the turning point for the company which has struggled in the executive commuter segment. BAL’s strategy is to entice the executive commuter customers to its new ‘V’ brand which was recently launched at ₹62,000.
We believe the recovery of the domestic motorcycle market is crucial for BAL’s performance going ahead. However, even in the sluggish market, BAL has made some smart moves such as revamping the Avengers which has aided in market share gains and outperform the overall motorcycle market. BAL’s earnings are expected to grow at a CAGR of 20 per cent over FY15-18E currently. Better than expected growth of the domestic motorcycle market (current projection of 5 per cent) in FY17E could boost BAL’s earnings even further.
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