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Bajaj Auto Ltd. (BAJA.BO)
Research Tactical Idea
We believe the share price will rise relative to the country index over the next 60 days.
This is because the stock has traded off recently, making short term valuation much more compelling. As we approach
June 2011, the market debate on the DEPB extension has heated up, and two-wheeler exporters like Bajaj Auto are down
10% on the same. Although DEPB extension is subject to government action, and thus difficult to project, we feel the
current price is factoring in the worst-case scenario and so the risk-reward looks favorable for a trading rally in the name.
The worst-case scenario is that the government withdraws the full incentive and earnings drop 12-14%. This seems priced
in after the recent decline, and in our view things can only suprise postively from here.
We estimate that there is about a 60% to 70% or "likely" probability for the scenario.
Estimated probabilities are illustrative and assigned subjectively based on our assessment of the likelihood of the
scenario.
Stock Rating: Equal-weight
Industry View: In-Line
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bajaj Auto Ltd. (BAJA.BO)
Research Tactical Idea
We believe the share price will rise relative to the country index over the next 60 days.
This is because the stock has traded off recently, making short term valuation much more compelling. As we approach
June 2011, the market debate on the DEPB extension has heated up, and two-wheeler exporters like Bajaj Auto are down
10% on the same. Although DEPB extension is subject to government action, and thus difficult to project, we feel the
current price is factoring in the worst-case scenario and so the risk-reward looks favorable for a trading rally in the name.
The worst-case scenario is that the government withdraws the full incentive and earnings drop 12-14%. This seems priced
in after the recent decline, and in our view things can only suprise postively from here.
We estimate that there is about a 60% to 70% or "likely" probability for the scenario.
Estimated probabilities are illustrative and assigned subjectively based on our assessment of the likelihood of the
scenario.
Stock Rating: Equal-weight
Industry View: In-Line
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