ICICIdirect has maintained Buy on Bajaj Auto (BAL) with target price of Rs 2,569 as against current market price of Rs 2,315 in its report.

Commenting on the investment rationale, the stock broker said, "BAL is one of the few Indian manufacturing OEMs with a global presence/market share coupled with global R&D standards along with quality management. On the financials front, ~82% of the business operates at ~20% EBITDA margin. BAL has one of the lowest fixed cost structure (~7%) in the industry, thus leading to negative working capital and >200% operating RoCE (current).

The management is aiming to increase the domestic market share in the motorcycle space to ~24%. BAL is aiming to pull customers away from Hero's bread and butter segment (Splendor/Passion) through the re-launch of CT 100, new family of Pulsars [(Adventure sport (150cc), Super Sport (200cc), Cruiser Sport (400 cc)].

We believe the earnings trajectory will remain strong at a CAGR of ~30% in FY15-17E and remains a low risk, high RoCE business. We value BAL on an SOTP basis, valuing the core business at 15x FY17E EPS and investment in KTM to arrive at a target price of Rs 2,569. We maintain Buy rating on the stock with an upside potential of 11%. We advise portfolio clients to add the stock on any major dips.

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