subject: ICICI Sec, Kotak Sec and Amit Goel, Director, PACE Stock Broking Services says 'book profits' in Bajaj Auto shares [print this page] Not positive on Bajaj Auto: Amit Goel
14sep 2010
ET Now spoke to Amit Goel, Director, PACE Stock Broking Services, on his take on Bajaj Auto Vs Hero Honda
What is the sense in the auto pack? Particularly in the 2 wheeler space if you were to do a comparison between a Bajaj Auto and a Hero Honda, market share wise obviously you have Hero Honda which is leading the market share, it is around 42% of the market share that it has but in terms of market capitalization you have got Bajaj Auto that superseded Hero Honda. So at this current point in time do you see a possible buying into pessimism in a counter like Hero Honda?
Actually one could make a case like that but what has been happening is that Bajaj Auto was an underperformer in a very big way in 2008 and 2009 and to the extent that market participants were dumping Bajaj Auto at practically ridiculous prices multiyear lows last year and at the same time, they were gung ho on Hero Honda.
Now Bajaj Auto has come back fundamentally in a very big way and now they are taking market share, they have introduced more new models than Hero Honda and those new models have been hit with the market.
So their market share has actually risen in the last 6 to 9 months but now probably while Bajaj Auto is doing well but then there is a certain premium that you can pay for a certain outperformance. Currently Bajaj Auto, the kind of premium it is commanding, is probably a little undeserved and while I would not be so gung ho on Hero Honda for the time being but Bajaj Auto seems to have probably run its course and I would not be so positive on Bajaj Auto going forward.
Kotak Securities said on Thursday it had downgraded Bajaj Auto, India's second-largest motorcycle maker, to "reduce" from "add" on unattractive risk-reward ratio.
Bajaj Auto touched an intraday high of Rs 1,479 and an intraday low of Rs 1,458. At 11:02 hrs the share was quoting at Rs 1,465.00, down Rs 0.6, or 0.04%.
ICICI Sec says 'book profits' in Bajaj Auto shares
ICICI Securities Monday advised investors to 'book profits' in Bajaj Auto shares due to stretched valuations and impact of production constraints.
The brokerage has set target price of Rs 1,379 on the share.
"Bajaj Auto (share) has appreciated over 21% in the last one month and is trading at 14.7 times its 2011-12 (Apr-Mar) earnings multiple. The stock looks expensive at these levels, we advise to book profits," ICICI Securities analysts Karan Mittal and Nishant Vass said in a note.
The company is also facing component and production constraints, which may prevent it from reaching targeted sales of 4 million vehicles in 2010-11, the brokerage said.
ICICI Sec, Kotak Sec and Amit Goel, Director, PACE Stock Broking Services says 'book profits' in Bajaj Auto shares
By: Smart Profit
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