Bajaj Auto shares decline 3% despite 35% growth in Q4 profit; here's why

Shares of Bajaj Auto declined as much as 3.5% to hit an intraday low of ₹8,700.05 apiece on the BSE even after the company reported a 35% surge in the consolidated net profit in the January to March quarter of FY24. The share price of the three-wheeler manufacturer tumbled after brokerages say that the stock price has already run way ahead of its target prices and the company’s valuation might be expensive. The weakness in the broader market also dented sentiment. 

Analysts at brokerage firm CLSA, while raising the target price to ₹6,889 per share, say that the stock is overvalued post recent rally. Echoing the similar thoughts, analysts at Kotak Institutional Equities say that the valuations remain expensive at 30x FY25 core EPS. Both brokerage firms have given a ‘sell’ call to the stock.

The scrip opened higher at ₹9,094.50, up 0.85%, as against the previous closing price of ₹9,017.75. The stock, however, lost momentum and declined in sync with the broader market. At 11:49 am, the stock price of the company was trading 2.77% lower at ₹8,768.20. This was in line with the broader BSE Sensex, which was trading 202 points or 0.28% lower at 72,286. The company’s market capitalisation stood at ₹2,46,015 crore with 12,402 shares exchanging hands on the BSE, as against the two-week average of 8,457 shares. The company hit a 52-week high of ₹9,356 on April 2, 2024, and a 52-week low of ₹4,253.75 on April 20 last year.

In the past one month, three months and one year, the counter has surged 0.76%, 22.19% and 104.47%, respectively. In the year-to-date period, the counter has surged 30.13%, respectively.

In the January to March quarter of FY24, the company’s net profit grew 35% year-on-year to ₹1,936 crore as against ₹1,433 crore in the same period last fiscal, driven by sustained domestic business and steady margins. The company’s revenue from operations surged by 29% to ₹11,833 crore, led by the broad-based buoyancy that was sustained on the domestic business and aided by steady exports, despite "continued challenges" in the overseas market.

The company’s EBITDA (earnings before interest, tax, depreciation and amortization) witnessed a growth of 34% year-on-year, with a margin of 20.1%. The company sold a total of 10.6 lakh units in the said quarter, which grew 24% over 8.5 lakh in the year-ago period. Among the different markets, the company's domestic business grew the highest by 29% in Q4 FY24, while exports dipped by 10%. The commercial vehicle sales surged 28% compared to the 10% sales recorded in the two-wheeler category.

The company expects the motorcycle industry to grow by 8-10% in the coming months. Bajaj Auto currently holds a 31% market share in the country's motorcycle segment. Segment-wise, the company holds a 40% market share in the 125 cc-250 cc sports bike segment on the back of its flagship N series. This was in contrast to 32% market share in the 125 cc-250 cc segment in FY23.

The board of Bajaj Auto has recommended a final dividend of ₹80 per share, totalling ₹2,233 crore for the fiscal year, says the company, adding that this is in addition to its recent share buyback of ₹4,932 crore.