Bajaj Auto- Dec ’10 volumes: A tad disappointing: Anand Rathi

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Bajaj Auto
Dec ’10 volumes: A tad disappointing
Bajaj Auto reported volume growth of only 9.8% yoy (lower 7.5%
mom) to 276,803 units in Dec ’10, which was below expectations.
 Motorcycle growth rate relatively lower. With base effect
catching up, Bajaj Auto’s (BAL) motorcycle growth rate was
10.8% yoy (lower 8.1% mom) at 243,675 units, the lowest
motorcycle volumes since Feb ’10. In terms of product mix, the
more profitable Pulsar and Discover platforms together continue
to command a dominant 70% share.

 Volume outperformance ceases in 3Q. BAL’s volume
outperformance vs. top peers lasted for 13 consecutive months,
from Sep ’09 to Sep ’10. While in Oct ’10 and Nov ’10, BAL saw
on-par performance with peers, its motorcycle volume growth was
lower than industry in Dec ’10, the first time in 16 months.

 Exports steady. In Dec ’10, exports growth was steady at 4.4%
yoy and 5% mom.
 Three-wheeler sales grew 4.9% yoy (lower 3.1% mom) to 33,128
units, in line with expectations.
 Valuation and risks. We are upbeat about BAL’s volume-growth
outlook and anticipate improved 4QFY11 volumes. We re-iterate
Buy on the stock. Risks: lower demand; commodity cost pressure.