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Bajaj Auto Ltd.
F1Q12: In-Line Results
Quick Comment: Bajaj Auto reported F1Q12 results
with EBITDA at Rs9bn, in-line with our forecast but 6%
below consensus expectations. Overall, the revenues,
EBITDA and net income were up 23%, 17% and 20%
YoY respectively. We prefer Bajaj Auto to Hero Honda
(rated Underweight) but with valuations at 14x FY12e
and volume/earnings growth slowing down, we remain
neutral on the name.
Some key highlights from the results
- While volumes were up 15% QoQ, the mix
deterioration led to realizations decline of 1.8% QoQ.
ASPs went down as: a) in domestic sales, mix shifted
towards less than 125cc segment; and b) low
realizations based exports increased in overall mix
(Exhibit 5). We expect similar trend to play out in Q2 as:
1) the company launches another entry-level bike
(Boxer); and 2) exports remain strong as OEMs push
sales ahead of DEPB withdrawal (expected to end by
September 2011).
- EBITDA margin was 19.1%, down 140 bps QoQ and
below 20% after seven quarters. Most compression
came from raw material side. The company took a price
hike in early May 2011, thus absorbing some cost
pressures. We expect Q2 margins to be around Q1
levels as commodities weaken but mix deteriorates.
-The Bajaj commercial four wheeler will be showcased
in the January 2012 auto expo; thus we expect sales to
start in FY13. We have limited information on this
product but we think it is mostly likely to be a below-20%
margin product and would make up for the slowdown in
three wheelers.
- Tough comps for three wheelers from Q2: The
domestic three wheeler industry is slowing down (up
only 2% YoY in F1Q12 vs 22% growth in FY11) and
Bajaj on account of capacity constraint had weak
numbers in F1Q11 last year but sales bounced back in
Q2FY11 thus implying tough comps for Bajaj in the
coming quarters
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