India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
EBITDA for the Dec quarter came in line with our forecasts, up 17% yoy but 7% below on qoq.
Higher other income and lower depreciation led to PAT surprise of 8%, which registered 28% yoy
growth. With concerns over the declining market share in the 2-wheeler segment of the company,
we reiterate Sell.
EBITDA came in line; PAT surprised on higher other income & lower depreciation
Bajaj Auto for the December quarter reported a normalized net profit of Rs.6.67bn (up 28%
yoy but down 4% qoq) on the back of net sales of Rs.41.8bn (up 27% yoy and down 4%qoq).
EBITDA margin of 20.3% were in line with our forecast and were down ~160bps yoy and
~70bps qoq. The yoy decrease in EBITDA margins was mainly due to increase in raw
material cost as a % of net sales, partially offset by lower manufacturing and other expenses
as a % of net sales. EBITDA for the quarter stood at Rs.8.5bn, in line with our estimates and
up 17% yoy but down 7% qoq. Depreciation for December quarter declined 13% yoy (+4%
qoq) to Rs.310mn despite a strong 17% yoy volume growth. Non operating income for the
quarter was at Rs.995mn, up 183% yoy (+19% qoq), higher than RBS forecast of Rs.700mn.
The higher other income and lower depreciation were the main reasons for a PAT surprise of
8% vs RBS estimate. Normalized EPS for the quarter was Rs.23.1/share.
Normalized PAT for the 9MFY11 came at Rs.19.6bn, up 52% yoy on net sales of Rs.124bn,
up 46% yoy. EBITDA margin for the period declined 85bps qoq to 20.5% and EBITDA rose
40% yoy to Rs.25.4bn. Normalized EPS for the period was at Rs.67.6/share, up 52% yoy with
lower depreciation (down 10% yoy) and higher other income (up 231% yoy) boosting the
bottom line. Cash and cash equivalent as at the end of the December'10 were at Rs.38.2bn.
Optimistic guidance by the management; we remain cautious
The revised FY11F volume guidance by the management is 3.9mn vehicles (from 4mn earlier
and in line with RBS estimate of 3.84mn) and it maintains its guidance for 20% EBITDA
margin for FY11 (RBS estimate in line). The management also guided for a 20% volume
growth in FY12 (RBS estimate 12.5%) with an operating margin of 20%. We believe that the
20% volume growth guidance by the management may prove over-optimistic given the easing
industry growth.
We would like to remain cautious about the management guidance and believe that the
4QFY11 volume performance would set the tone for FY12F growth. The 2 wheeler market
share of the company has fallen 230bp in the 3QFY11 after gaining for six straight quarters
and as mentioned in our last report (dated 11th January, 2011), we believe that competition in
the market will intensify with market leader Hero and Honda looking to increase their capacity
in medium term, post their JV split.
Valuation
The stock trades at 15.2x FY11F and 14.0x our FY12F EPS forecast and has corrected
sharply since the start of the new calendar year. Rising fuel costs are expected to put further
pressure on premium bike segment volumes of the company despite favourable employment
scenario in IT industry. Also, the high returns of 3 wheelers business may not be sustainable
given the increasing competition from other top players of the market. With around 17%
downside to our target price, we maintain Sell.
No comments:
Post a Comment