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Bajaj Auto
Another tough guidance
Least preferred major
Bajaj Auto ended FY11 sales at 3.825mn units, well below management sales
guidance of 4mn units. We similarly expect the company to fall short of FY12
growth target of 20%. We however raise EPS forecasts by 2%-3% over FY12-13
solely driven by revisions to three wheeler/export sale assumptions, and similarly
our PO. Reiterate Underperform on slowing growth and expensive valuations.
Management repeats aggressive guidance
Bajaj Auto’s FY12 guidance of 20% aggregate sales growth seems aggressive.
Our growth forecasts are lower at 15%, as we believe that competition will
intensify, both from Honda (in premium bikes) and Hero Honda (commuter bikes).
Three wheelers and export markets will however continue to do well.
Margin assumptions unchanged
Largely retain our margin assumptions over forecast period i.e. 140bps
cumulative decline to 19%. This reflects higher cost and competitive pressures,
lower export realizations due to adverse currency movement.
Reiterate Underperform
Valuations appear rich and stock fully valued, trading at significant premium to
historical and peer group average. Our sum of parts methodology imputes P/E
multiple similar to Hero Honda, as better margin profile and return parameters
make up for lower growth over FY11-13.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bajaj Auto
Another tough guidance
Least preferred major
Bajaj Auto ended FY11 sales at 3.825mn units, well below management sales
guidance of 4mn units. We similarly expect the company to fall short of FY12
growth target of 20%. We however raise EPS forecasts by 2%-3% over FY12-13
solely driven by revisions to three wheeler/export sale assumptions, and similarly
our PO. Reiterate Underperform on slowing growth and expensive valuations.
Management repeats aggressive guidance
Bajaj Auto’s FY12 guidance of 20% aggregate sales growth seems aggressive.
Our growth forecasts are lower at 15%, as we believe that competition will
intensify, both from Honda (in premium bikes) and Hero Honda (commuter bikes).
Three wheelers and export markets will however continue to do well.
Margin assumptions unchanged
Largely retain our margin assumptions over forecast period i.e. 140bps
cumulative decline to 19%. This reflects higher cost and competitive pressures,
lower export realizations due to adverse currency movement.
Reiterate Underperform
Valuations appear rich and stock fully valued, trading at significant premium to
historical and peer group average. Our sum of parts methodology imputes P/E
multiple similar to Hero Honda, as better margin profile and return parameters
make up for lower growth over FY11-13.
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