Bajaj Auto Shares Down on Flat June Sales; Should you Buy, Hold or Sell

Shares of Bajaj Auto were down 3 per cent after the company reported weak two-wheeler sales for June. Bajaj Auto’s domestic two-wheeler sales fell 20 per cent year-on-year to 125,083 units in June despite the year-ago month being partially affected by the second wave of the COVID-19 pandemic.

The company’s total two-wheeler sales grew 2 per cent year on year (YoY) to 315,948 units, mainly due to a 23 per cent YoY jump in exports at 190,865 units during the month. Domestic two-wheeler sales, however, declined 20 per cent YoY at 125,083 units.

One of the other reasons for weak demand at Bajaj was the fact that it has recently discontinued its CT100. Hence, the cheapest model available today is not from Bajaj Auto but from a competitor. This move has hurt BAL’s sales in the 100cc segment where it earlier sold good numbers in rural regions, said HDFC Securities.

Analysts had expected the company to report around 321,000 units of sales volumes for June. Expectations in the market were that two-wheeler sales were seeing a recovery owing to good rabi season crops.

While demand is picking up for motorcycles, Bajaj Auto dealers seem to be amongst the worst hit due to massive supply constraints. Most dealers were getting just about 25-30 per cent of their requirement for 125cc and above models. Given Bajaj Auto has a 53 per cent contribution from the overall mix in this segment, it is the worst hit in the industry, the brokerage said in its auto sector update.

Stock Price History

Bajaj Auto shares plunged 2.81 per cent to Rs 3,601.65 against the previous close of Rs 3,705.65 on BSE. The large-cap stock trades higher than 200-day moving averages but lower than 5-day, 20-day, 50-day, and 100-day moving averages. A total of 0.12 lakh shares of the firm changed hands, amounting to a turnover of Rs 4.28 crore on the BSE. The market cap of Bajaj Auto slipped to Rs 1.04 lakh crore.

The large-cap stock hit a 52-week high of Rs 4,250 on July 1, 2021, and a 52-week low of Rs 3,028.35 on December 20, 2021. The stock has lost 13.88 per cent in a year and gained 11.42 per cent this year.

What Do Analysts Say?

BofA Securities said the downgrade for Bajaj Auto comes on the deteriorating export outlook with macro turning challenging in its key export markets (especially Nigeria). The brokerage expects export volumes of Bajaj Auto Expect to decline in FY23 against street expectations of 8-10 per cent growth. It sees lower earnings per share (EPS) by 4-6 per cent for F23/24 estimated as lower volume assumptions by 7-8 per cent.

Earlier this week, Religare Broking has buy call on Bajaj Auto with a target price of Rs 4290. The current market price of Bajaj Auto Ltd. is Rs 3880.6. Time period given by analyst is Intra Day when Bajaj Auto Ltd. price can reach defined target.

On June 27, the firm announced a share buyback worth Rs 2,500 crore. The buyback represents 9.61 per cent of the total paid up share capital. The firm said its board cleared buy back of shares at a price not exceeding Rs 4,600.

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