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Bajaj Auto
Bajaj Auto (BAL) reported 26.7% yoy top-line growth to `4,177cr, which was 1.6% above our
expectation of `4,113cr, largely aided by a ~17% yoy increase in volumes. Top-line
performance was also aided by a ~14.8% yoy increase in other operating income of `149cr
(`130cr in 3QFY2010). A favourable product mix helped the company to post ~8.7% yoy
growth in average net realisation to `42,543. Overall market share in the motorcycle
segment for 3QFY2011 stood at 31%, where high-end motorcycles contributed over ~70%
to the company’s total motorcycle sales. The company’s export revenue recorded good
~19% yoy growth during the quarter; the company targets to achieve US $1bn for FY2011.
EBITDA margins came in 30bp ahead of our estimate at 20.2%, a fall of 172bp yoy and
43bp qoq. Raw-material cost for the quarter increased by almost 240bp yoy and 45bp on a
qoq basis. Richer product mix along with higher commercial vehicle volumes restricted the
substantial contraction at the operating front. Further, improved operating leverage helped
the company to save on staff costs and other fixed expenditure, which also restricted the
contraction in EBITDA margins yoy to a certain extent. BAL reported net profit growth of
39.5% yoy to `663cr (`475cr in 3QFY2010), as against our estimate of `596cr, largely
aided by higher other income at `99.5cr (35.1cr in 3QFY2011).
At current levels, the stock is trading at 13.3x FY2012E earnings of `99.5. Owing to the
recent decline in the stock price, we recommend Buy (Neutral) on the stock with a Target
Price of `1,494 based on 15x FY2012E earnings. We would be releasing a detailed result
update post the earnings conference call with the management.
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