Bajaj Auto shares jump 8% on 26% rise in April 2018 sales; exports record highest ever sales

Two-wheeler giant Bajaj Auto share price surged by nearly 8% on Wednesday, after the company mentioned that it sold 415,168 vehicles in April 2018 month rising 26% compared to sales of 329,800 units in the same month of previous year. The share price of Bajaj Auto has touched an intraday high of Rs 3,183 witnessing gains of 7.99%. In previous day, the company’s stock was valued at Rs 2,948 per piece.

However, at around 12:31 hours, the company’s stock was trading at Rs 3,020 per piece above Rs 72 or 2.44% on BSE. 

The performance in April 2018 month, was boosted by exports which recorded highest ever sales across segments. 

Overall exports stood at 185,704 unit this month, higher by 22% from 151,913 units a year ago same month. Meanwhile, domestic sales came in at 229,464 units up by 29% from 177,887 units in April 2017. 

Motorcycle segment grew by 19% with total sales of 349,617 units in April 2018 versus sales of 293,932 units in April 2017. This segment rose by 24% yoy in domestic market with sales of 200,742 units this month, whereas in exports market the two-wheeler segment surged by 13% yoy to 148,875 units sales. 

Commercial vehicle of Bajaj Auto recorded highest ever sales in April 2018, by selling 65,551 units which was an increase of a whopping 83% from 35,868 unit in April 2017. 

Commercial vehicles exports jumped by a massive 85% with sales of 36,829 unit in April 2018, followed by an increase of 80% in domestic markets by selling 28,772 units. 

However, analysts give a Sell call on Bajaj Auto despite good performance, here’s why. 

Ashvin Shetty, Ritu Modi and Gaurav Khandelwa analysts at Ambit said, “We expect increasing competition from Royal Enfield, TVS and Honda to impact market share in the highly lucrative premium segment (loss of 100bps over FY16-FY18 in continuation of the 750bps loss over FY12- FY15).”

The duo added, “Macro/political issues and increasing difficulty in market share gains in export markets to restrict export volume growth to 9% over FY16-FY18. INR depreciation benefits would be limited by significant devaluation in local currencies/price cuts. While Bajaj trades close (14.7x) to historical multiples, subdued earnings growth are likely to weigh in on share price.”

Bajaj lost 861bps market share in its core and highly profitable premium bike segment over FY12-YTDFY16 to Royal Enfield, Yamaha and TVSM. 

Therefore, the trio said, “We largely leave our FY16/FY17 net earnings estimates unchanged (down 1- 2%) and are 2%-5% behind consensus. In our SOTP of Rs 2,410, we value the core business at Rs 2,250, 14.7x one-year forward EPS, a 3% discount to the last five-year average.”