Visit http://indiaer.blogspot.com/ for complete details Bajaj Auto
Bajaj Auto (BAL) reported 50.4% yoy top-line growth to `4,342cr, which was above our
expectation of `4,212cr. Growth was largely aided by ~46% yoy jump in volumes. The
top-line performance was also aided by ~71% increase in other operating income at
`161cr (`94.3cr in 2QFY2010). Favourable product mix helped the company to register
~3% yoy increase in average net realisation at `41,786.
On the operating front, EBITDA margins were 66bp ahead of our estimate at 20.7%, a
jump of 69bp qoq and a fall of 138bp yoy. Raw-material cost for the quarter increased by
almost 490bp yoy, while it declined by 110bp on a qoq basis. Richer product mix along
with higher commercial vehicle volumes supported the company to report sequential
improvement at the operating front. Further, improved operating leverage helped the
company to save on staff cost and other fixed expenditure, which restricted the contraction
in EBITDA margins yoy to a certain extent. Net profit grew 69.3% yoy to `682cr (`403cr in
2QFY2010), as against our estimate of `644cr, largely aided by improved operating
performance and higher other income. Other income for the quarter increased to `83.7cr
(`21.7cr in 2QFY2010).
At current levels, the stock is trading at 19x FY2011E and 16x FY2012E earnings. We
maintain our positive outlook on the company. However, due to the recent run-up in the
stock price, we recommend a Neutral view to the stock, as we believe most of the positive
news flow is already factored in. At present, our fair value for the stock works out to be
`1,603. We would release a detailed result update post the earnings conference call with
the management.
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