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Bajaj Auto (BAJA.BO)
Buy Equity Research
Strategy drives rising global profile, focus on cash returns, Buy
What's changed
In June, KTM and Bajaj Auto announced they had jointly developed the
new Duke 125 cc motorcycle, a global model which will be sold in a
modified 200cc version in emerging markets. Near term impact on
financials is unlikely to be material, in our view. Long term, however, we
believe this partnership will enhance Bajaj Auto’s ability to offer
differentiated, higher technology products to a maturing consumer base in
ASEAN, Latin America, and India. We also believe that recent joint
launches with partners (including the Kawasaki Ninja 650R launched last
week) underscore Bajaj’s rising global profile and confidence in execution.
We remain positive on Bajaj’s well-articulated brand & technology strategy
which is interlinked with a strong focus on cash returns, and premised on:
1) a twin brand strategy for the domestic market to exploit a high demand
pull for their strongest brands; 2) a focus on Boxer and Platina for highvolume economy segments to optimize scale and cost leadership; 3) an
equity holding in KTM with a technology development alliance, which
leverages KTM’s skills in design & engineering of premium motorcycles,
and 4) a technology and marketing alliance with Kawasaki in the super
premium motorcycles segment.
Implications
We believe that in the long term Bajaj Auto has the potential to emerge as
a significant global player with a higher share of profits in the global
motorcycles industry. Amid an adverse inflation-driven demand cycle in
India, we like Bajaj Auto due to its high industry leading margins and
export revenues, and reiterate our Buy rating on the stock.
Valuation
The stock is currently trading at 13.2x FY12E P/E vs 10-year historical
average of 14x. We retain our 12-month FY12E P/E based TP of Rs1,451.
Key risks
Greater-than-expected success of competitors such as Honda and Yamaha.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Coverage View: Neutral
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bajaj Auto (BAJA.BO)
Buy Equity Research
Strategy drives rising global profile, focus on cash returns, Buy
What's changed
In June, KTM and Bajaj Auto announced they had jointly developed the
new Duke 125 cc motorcycle, a global model which will be sold in a
modified 200cc version in emerging markets. Near term impact on
financials is unlikely to be material, in our view. Long term, however, we
believe this partnership will enhance Bajaj Auto’s ability to offer
differentiated, higher technology products to a maturing consumer base in
ASEAN, Latin America, and India. We also believe that recent joint
launches with partners (including the Kawasaki Ninja 650R launched last
week) underscore Bajaj’s rising global profile and confidence in execution.
We remain positive on Bajaj’s well-articulated brand & technology strategy
which is interlinked with a strong focus on cash returns, and premised on:
1) a twin brand strategy for the domestic market to exploit a high demand
pull for their strongest brands; 2) a focus on Boxer and Platina for highvolume economy segments to optimize scale and cost leadership; 3) an
equity holding in KTM with a technology development alliance, which
leverages KTM’s skills in design & engineering of premium motorcycles,
and 4) a technology and marketing alliance with Kawasaki in the super
premium motorcycles segment.
Implications
We believe that in the long term Bajaj Auto has the potential to emerge as
a significant global player with a higher share of profits in the global
motorcycles industry. Amid an adverse inflation-driven demand cycle in
India, we like Bajaj Auto due to its high industry leading margins and
export revenues, and reiterate our Buy rating on the stock.
Valuation
The stock is currently trading at 13.2x FY12E P/E vs 10-year historical
average of 14x. We retain our 12-month FY12E P/E based TP of Rs1,451.
Key risks
Greater-than-expected success of competitors such as Honda and Yamaha.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Coverage View: Neutral
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