Religare downgrades Bajaj Auto to hold, target: Rs 510

MUMBAI: Religare Research has downgraded their rating on Bajaj Auto to 'hold' from 'buy' and set a target price of Rs 510.

Bajaj Auto's April-June 2008-09 results were in line with the brokerage's expectations, backed by a 9 per cent year on year growth in volume sales and stable realisations.

Margins, however, showed lower growth than expected due to spike in raw material costs and a forex loss of Rs 98.5 crore.

Bajaj Auto plans to launch four new products in the executive and premium motorcycle segments and two models in the three-wheeler space during 2008-09. However, the confluence of higher interest rates, rising inflation and increased input costs will dent sales volume. Exports, which constitute over 30 per cent of the company's sales volume, will provide some solace with a continued trend of double-digit growth. Margins are likely to remain under pressure during 2008-09.

Religare has assigned Bajaj Auto a P/E multiple of 8x on FY10E, given the volume and margin pressures that are evident in the two-wheeler industry.
thanks to : economictimes.indiatimes.com