Bajaj Auto – Down by 20%, but does an opportunity exist?

Bajaj Auto – Down by 20%, but does an opportunity exist?

Company Name Industry Segment Upside potential Last Price
Bajaj Auto Limited Automobile Two & Three Wheeler 15% Upside ₹ 2128.95
(as of 10th March)

Recently Bajaj auto limited stock price has witnessed 20% fall from 52- weeks high (Rs.2700 levels) due to the following reasons;
· Continuous downward EPS and revenue revisions for FY15 & FY16 by analysts and brokerages.
· Lackluster demand for two wheelers from rural India on account of weaker monsoon.

However while the downtrend continued for the last 3 months it’s still an opportunity to invest in this stock for the below described rationale;
· Forward ROE of the company is steady at 32 %( approx) and FY16 PE at 15.5 makes it an attractive valuation levels for an investment consideration.
· After 20% correction in stock prices, potential upside to target price has been revised to 15%.
· Downside risk appears to be limited as the stock is close to lower end of 5 years valuation levels.

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