Hold Bajaj Auto: Indiabulls Securities

Bangalore: Indiabulls Securities Research recommended a hold rating on Bajaj Auto with a target price of 1,077 in its June 26, 2009 research report.India Bulls Securities' research report says, "We believe that the stock is fairly valued at the CMP. Hence, we give a Hold rating to the stock." The one year stock price chart is on the left. During Q4'09, the company's net sales declined 10 percent Year over Year (yoy) to 17.9 billion due to a steep reduction in volumes, which fell by 20.3 percent yoy to 440,269 units. Over the past few quarters, the company has lost its two-wheeler market share to Japanese rivals: Honda Motorcycles, Yamaha, and Suzuki. Its two-wheeler market share (domestic and exports combined) has gone down from 32.7 percent in FY08 to 28 percent in FY09. In order to regain its market position, the company is planning to launch a series of new models. "In the upcoming quarters, we expect the company's volume to pick up, led by new product launches, easing interest rates and a recovering economy. Further, we expect the company to achieve better net realizations as a result of its increasing focus on the high-margin Executive and Premium segments. Accordingly, we expect the company's top-line to grow at a CAGR of 9 percent in FY09-11," says India Bulls report. Brokerage firm have a positive outlook on the auto sector primarily based on the early signs of recovery in the economy, lower interest rates, and easing financing norms. India Bulls expect a 9 percent increase in the company's FY10 volumes.