Bajaj Auto hits new high; rallies 12% in one week after robust Feb sales

The sharp run-up in Bajaj Auto's stock has led to the company crossing Rs 2.5 trillion in market cap for the first time today

Shares of Bajaj Auto rallied 3 per cent on BSE to hit a new high of Rs 8,860 in Thursday’s intra-day range-bound trade.

In the past one week, the stock has surged 12 per cent after reporting a healthy 24 per cent growth in February overall sales at 346,662 units compared to 280,226 units in the year-ago period. 

The sharp run-up in the stock price has led to the company crossing Rs 2.5 trillion in market cap for the first time today.

At 11:13 am; Bajaj Auto was trading 3 per cent higher at Rs 8,854.75, with a market cap of Rs 2.51 trillion on the BSE, exchange data showed. In comparison, the S&P BSE Sensex was up 0.1 per cent at 74,158.

The company’s domestic sales grew 35 per cent to 206,894 units and exports rose 10 per cent at 139,768 units during February. 

Meanwhile, the stock turned ex-date for buyback last week. The record date for eligibility to participate in the buyback was on Thursday, February 29, 2024.

Thus far in the calendar year 2024, Bajaj Auto has surged 30 per cent while in the past six months, the stock has zoomed 88 per cent.

Bajaj Auto’s buyback was announced in January 2024. It opened on Wednesday, March 6, 2024.

Under the offer, Bajaj Auto would buyback up to 4 million equity shares, representing nearly 1.41 per cent of the total number of equity shares of the company, via tender offer. The buyback price is Rs 10,000 per equity share. The buyback size is Rs 4,000 crore.

Bajaj Auto said the growth of the business, robust cash generation and strong balance sheet position allows it to reward its shareholders from time to time, as in the current instance, while retaining sufficient capital for growth investments, and opportunities.

The buyback reinforces the company’s commitment to its shareholders by returning surplus cash to them in an effective and efficient manner, which in turn will improve its earnings per share and return on equity, it added.

Bajaj Auto believes that the buyback is not likely to cause any material impact on its profitability or earnings except to the extent of reduction in the amount available for investment, which the company could have otherwise deployed towards generating investment income.

Considering that the buyback price is at a premium to current price, analysts believe it is an attractive opportunity for eligible shareholders to participate in the buyback.

According to analysts at KRChoksey Shares & Securities, Bajaj Auto has continued to deliver on its 5 focus areas including growth in 125cc+ segment through Pulsar franchise, 80 per cent market share in domestic 3W and ramp up of electric three-wheelers, QoQ improvement in exports, ramp up in Chetak network and sales, and scale up of Triumph and leveraging new portfolio in KTM.

Excluding a slower recovery in exports due to continued macroeconomic and geopolitical concerns, Bajaj Auto is firing on all the other focus areas. Even in exports, recovery continues, albeit at a slower pace. The strong growth and market share gains in the 125cc+ segment in domestic 2W and domestic 3W are the major contributors to Bajaj Auto’s record revenue and profitability, analysts say. 

Bajaj Auto’s businesses, which are in the ramp-up phase namely Chetak E-2W, E-3W and Triumph are progressing well on the stated goals of new launches, network expansion and market share gains, as per KRChoksey Securities.

The stock is trading above its target price of Rs 8,818 per share.