2-wheeler listed cos remain expensive

Domestic two-wheeler companies valuations trade significantly above the long-term average multiples, says a report by Kotak Institutional Equities.

“Hero MotoCorp, Bajaj Auto and TVS Motors are trading 1 STD above the long-term price-to-earnings multiple. We believe these multiples are expensive as (1) re-rating in multiples for the companies are not commensurate with the long-term growth prospects of the domestic industry, given high penetration levels and (2) pick-up in electrification, which will result in increased competitive intensity and weigh on profitability,” the report said. “Our reverse DCF analysis on domestic listed 2W players (Bajaj Auto, Eicher Motors, Hero MotoCorp and TVS Motors) yielded a combined market share of more than 90 per cent to justify the current market price of respective companies, implying a negligible market share for Japanese OEMs and other new age OEMs in the EV segment,” the report said.