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UBS Investment Research
Bajaj Auto
HH increases prices, positive for Bajaj
Positive read-through from price hike by HH
Hero Honda has raised prices by Rs 750-1500/bike (~2%) across models in its
portfolio. We believe this sharp increase improves relative competitiveness of
Bajaj products as well as gives it a leeway to increase prices going forward. We expect Bajaj’s margin outlook to remain strong as co. increased domestic motorcycle prices by 2% from Oct 1. We maintain Buy rating and price target of Rs.1,775.
Nov. shipments grew 8% YoY, domestic motorcycles up 19% YoY
Overall shipments grew +8% YoY with domestic motorcycles growing by +19%
YoY. Exports declined 8% YoY mainly due to strike by a key transporter that
controls ~70% of containers from the plant to port. 3W shipments were flat YoY.
Maintain strong volume growth outlook
We expect the Discover to continue to drive domestic market share gains for Bajaj
in FY12 and outpace industry growth. We forecast 20% YoY growth for Bajaj’s
domestic motorcycle volume in FY12/13. We expect its exports to continue to
grow strongly, led by Africa and other emerging markets. We estimate motorcycle
export volume growth of 30%/20% YoY in FY12/13.
Valuation-Maintain Buy and price target of Rs.1,775
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers with UBS’s VCAM tool with a WACC of 11.3%.
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