CMP = Rs 674 (at the time of recommendation)
Price target: Rs 941
Key points:
- Bajaj Holdings & Investment Ltd (BHIL) holds a 30% stake each in the new Bajaj Auto and Bajaj Finserve. BHIL also holds cash and investments held by the erstwhile Bajaj Auto. Since the company was formed after the de-merger of the erstwhile Bajaj Auto, the previous comparable figures are not available.
- BHIL has reported a consolidated top line of Rs 62.6 crore for Q4FY2008 and that of Rs 3.63 crore for FY2008. The PAT stands at Rs 79.3 crore for Q4FY2008 and at Rs 525.7 crore for FY2008.
- BHIL holds cash and investments in various companies, such as ICICI Bank, Bajaj Auto Finance and Maharashtra Scooters. It will continue to hold the cash and investments in liquid form for the next two years to be able to lend to the newly formed Bajaj Auto and Bajaj Fin Serv if and when the need arises. Only when these two companies begin to generate sufficient cash flows on their own to fund their businesses will BHIL invest the cash and investments for the long term. For instance, BHIL also has a 260-acre special economic zone in Aurangabad and part of the cash could be used to expand this business in future.
- I have valued the stakes of Bajaj Auto and Bajaj Finserve in BHIL at a 50% holding company discount and it works out to Rs 234 per share. Further, as on date the value of BHIL's investment portfolio is Rs 692 per share.
- I recommend a Buy option on the stock with a price target of Rs 941.
