Buy this large cap debt free stock offering a 4.5% dividend yield
Bajaj Auto: a good deed to buy and hold
Even if the markets consolidate the stock of Bajaj Auto, it may be a good bet at current levels. Shares fell from Rs 4,361 to 52 week highs to Rs 3,175, which was a loss of nearly 27%. The company’s shares are also now available at a reasonable price for a multiple of 14 times earnings.
Bajaj Auto is also a debt free company with strong holdings of cash and cash equivalents. In fact, as of September 30, 2021, after the payment of a dividend of Rs 4,051 crore, the excess cash and cash equivalents stood at Rs 17,526 crore against Rs 17,689 crore as of March 31, 2021.
Solid performance in the first half of 2021-2022
Despite the slowdown after the second wave of Covid-19 and the sluggishness of the domestic market, Bajaj Auto performed well as of September 30, 2021. Motorcycles sold nearly 828,000 units on the domestic market; share of 19.1% in H1 / 2021-22 compared to 18.2% in H1 / 2020-21. Commercial vehicles also sold over 58,000 units in the domestic market. The company continues to be a leader in the domestic market with a share of 67.6% in H1 / 2021-22.
Ratings and view
We believe that Bajaj Auto stock, which had fallen sharply from 52 week highs, is an attractive choice on the valuation front. The company’s business outlook remains strong with a strong recovery in fiscal year 2022-23 as economic activities normalize. Management also expects exports to remain a key driver of growth in the years to come.
According to a recent Sharekhan report, Bajaj Auto has strong long-term revenue visibility, given its leadership position in the premium bike segment and major export destinations. The company is also looking to move forward and expand its electric vehicle business.
“Bajaj Auto is our preferred choice in the two-wheeler space, thanks to strong exports, an expected upturn in premium bikes and preparation for the expansion of the electric vehicle market. Therefore, we are keeping our buy rating on the stock with an unchanged price target of Rs. 4,800, ”Sharekhan recently said in its report.
A likely robust performance in the coming years, coupled with a steady stream of dividends, a debt-free status and huge holdings of cash and cash equivalents, make Bajaj Auto stocks a good choice at these levels.
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