Investor's Eye: Update - Bajaj Holdings & Investment

 

Investor's Eye [July 23, 2013]  Sharekhan www.sharekhan.com

Summary of Contents     STOCK UPDATE Bajaj Holdings & Investment Recommendation: Buy Price target: Rs1,396 Current market price: Rs800 Price target revised to Rs1,396  Result highlights  The consolidated income of Bajaj Holdings and Investment Ltd (BHIL) grew by 95.2% year on year (YoY) to Rs141.3 crore in Q1FY2014. The revenues crossed the Rs100-crore mark after a gap of nine quarters. In the same quarter the company's income grew by 74% on a sequential basis. The income from the company's associates grew by 12% YoY in Q1FY2014. Overall, the profit after tax (PAT) grew by 26.9% YoY to Rs443.2 crore. During Q1FY2014, the total market value of its investments grew by 1.8% sequentially whereas the cost of its investments grew by 3.3% due to an increased exposure to fixed-income securities and fixed deposits. The company reduced its exposure to equities during the quarter. The market value of its equity investments in the core associate companies (an 80% contribution) grew by 1.6% sequentially while the value of the other equity investments declined by 6.5% quarter on quarter (QoQ). Valuation Bajaj Auto is the key investment of BHIL and has been valued at 14x FY2015E earnings per share (EPS). Though the company reported quarterly results ahead of expectations (largely due to higher export realisations), but there are concerns over the slowdown in both the domestic demand and the export demand for motorcycles. Our price target for Bajaj FinServ is based on the sum-of-the-parts (SOTP) valuation method. Given the strategic nature of BHIL's investments, we have given a holding company discount of 50% to BHIL's equity investments. The liquid investments have been valued at cost. Our price target of Rs1,396 implies a 75% upside for the stock. We maintain our Buy recommendation on BHIL. Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

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