Bajaj Auto Posts Big Profit on Strong 2-Wheeler Sales; Big Dividend Declared

Investors were keenly awaiting the March 2024 quarterly results of Bajaj Auto, in a bid to understand the recovery in the two-wheeler sector.

Along with Q4 results, the automaker's board also approved a dividend at the rate Rs 80 per share (800%) of face value.

The Pune-based company reported a 33.4% year on year (YoY) growth in its core standalone operating profit to Rs 23.1 billion (bn) while its standalone net profit grew 35.2% YoY to Rs 19.4 bn.

The improved performance of the Bajaj group company was already factored in by Dalal Street with the stock ending Thursday's trade 1% higher at Rs 9,018, not too far from its 52-week high of Rs 9,356 reached on 2 April 2024.

Bajaj Auto benefited from a revival in rural and export demand in the March 2024 quarter with total sales rising 24.3% YoY to 1.062 million units.

The company reported strong demand for its upgraded Pulsar model in the domestic market in the March 2024 quarter coupled with a revival in export sales.

Average realisations of the company improved nearly 4.2% YoY in the fourth quarter of FY24 and it helped standalone operating profit rise 60 basis points to 20% in the quarter under review.

What Next?

Going forward, the two-wheeler major is planning to scale up its electric vehicle business.

The automaker is focussing on electric three-wheelers and electric two-wheelers. Bajaj Auto launched electric three-wheelers in select cities last year and has now rolled them out across 23 cities.

Bajaj Auto is ramping up sales of higher margin premium Triumph bikes, especially in overseas markets.

Also, sales volumes in the hinterland are expected to be strong going forward, with media reports highlighting a normal monsoon this year.

Nevertheless, a key cause of concern for the broader auto sector including two and four-wheelers is the rising cost of metals and allied inputs.

Investors should closely monitor individual companies' ability to offset this rising cost structure with suitable price hikes and productivity improvements.

How Bajaj Auto Shares have Performed Recently

In 2024 so far, shares of Bajaj Auto have surged over 30%.

In the year gone by, the stock is up 104%.

Bajaj Auto on 13 March 2024 completed its share buyback at a price not exceeding Rs 10,000 per share.

The company is also expected to benefit from a revival in rural and export demand, going forward.

Bajaj Auto stock currently trades at a P/E of nearly 30 times estimated standalone FY25 earnings while nearest rival Hero Motocorp trades at a P/E of nearly 20 times estimated FY25 earnings.

Bajaj Auto's operating profit margins are far superior to Hero Motocorp and it gets a better valuation on Dalal Street.

Here's a table comparing Bajaj Auto with its peers -

Comparative Analysis

Company	Bajaj Auto	Atul Auto	Eicher Motors	Hero MotoCorp	TVS Motor
ROE (%)	20.5	1.0	21.2	17.3	26.4
ROCE (%)	26.5	4.5	27.5	23.9	14.1
Latest EPS (Rs)	265.1	2.7	140.1	180.8	34.4
TTM PE (x)	34.0	179.9	31.1	23.5	56.3
TTM Price to book (x)	8.0	3.3	7.1	4.5	13.5
Dividend yield (%)	0.9	0.0	0.9	2.4	0.3
Industry PE	34.1
Industry PB	7.7

Data Source: Ace Equity, Equitymaster

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...