Brics PCG: 'Buy' Bajaj Auto

Brics PCG recommends to 'Buy' Bajaj Auto at Rs 2,790 with a target price of Rs 3,300  on the basis of sum of parts valuation. The stock trades at a P/E of 20.3x and EV/EBIDTA of 16.5x for FY08E.

Bajaj Auto has delivered a modest sales growth of 11.4% y-o-y (up 4.2% m-o-m) in August 2006, on the back of robust 20.9% growth in the motorcycle segment.

However, the three-wheeler performance was below par with a 14.8% y-o-y increase and a decline of 1.9% m-o-m. Exports also decelerated a bit as sales volumes dropped by approximately 10,193 vehicles as against the last month.

However this slowdown does not seem to be a major concern and Bajaj's sales are expected to pick up pace from next month . The company's FY07 year-to-date growth figures are still impressive at 25.7% y-o-y.