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In our recent meeting, Bajaj Auto reaffirmed its focus to maintain EBITDA
margins in the 19-20% range. It indicated that demand remains good in 2Ws
and robust in 3-wheelers despite current adverse macro conditions. The
company is poised to shortly launch the BOXER 150cc motorcycle which
primarily targeted at the rural market. We maintain BUY rating with target
price of Rs 1,600/share . Our FY12E/13E EPS estimates are Rs 99 / Rs 109.
Other estimates (FY12E/13E): Motorcycle volumes - 4.0 (19% YoY), 4.5
(13% YoY). 3W volumes - 515K (18%), 567K (10%).
Sales and margin trends
* 2-wheelers - The company expects to meet its volume guidance of 15%
for FY12E. In the domestic market, on a monthly basis, it is currently selling
around 125K Discover, 55K Pulsar and 30K Platina. Volumes for the Pulsar
135cc which was launched in recent past have plateaued at a level of 4K/
month.
* 3 wheelers - Sales trends are robust, especially in the export market. The
recent opening of permits for Bangalore would likely add extra 20-25K units
to the domestic volumes over the next 3 months.
* Margins - Bajaj expects commodity cost pressure to ease in 2HFY12E on
account of the recent fall in metal prices. The relatively higher fall in aluminium prices compared to steel will have a higher impact on motorcycle
margins than 3-wheelers. Due to the low supply chain inventory and swift
readjustment of component pricing, the impact of commodity costs reflect
relatively quickly on margins.
Export promotion scheme (DEPB) slated to be discontinued from October 2011 - Bajaj intends to take a price increase of around 5% to mitigate
the effect on profitability. The effective impact is around 8% of export revenues (30% of total revenues) leading to c12% fall in EBITDA. Our current
estimates factor the discontinuation but not the price hike.
Forthcoming launches- Two key launches are slated in the medium term:
Boxer 150cc (2QFY12) and a new Pulsar (likely in 4QFY12). The boxer is
targeted at the rural market and aims to provide a more powerful alternative
motorcycle than the segment leader which is the 100cc Splendour from
Hero Motorcorp. The new Pulsar will be a significant model refresh with
new engine and new styling. Bajaj also intends to launch a new motorcycle
from the KTM portfolio in CY12.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
In our recent meeting, Bajaj Auto reaffirmed its focus to maintain EBITDA
margins in the 19-20% range. It indicated that demand remains good in 2Ws
and robust in 3-wheelers despite current adverse macro conditions. The
company is poised to shortly launch the BOXER 150cc motorcycle which
primarily targeted at the rural market. We maintain BUY rating with target
price of Rs 1,600/share . Our FY12E/13E EPS estimates are Rs 99 / Rs 109.
Other estimates (FY12E/13E): Motorcycle volumes - 4.0 (19% YoY), 4.5
(13% YoY). 3W volumes - 515K (18%), 567K (10%).
Sales and margin trends
* 2-wheelers - The company expects to meet its volume guidance of 15%
for FY12E. In the domestic market, on a monthly basis, it is currently selling
around 125K Discover, 55K Pulsar and 30K Platina. Volumes for the Pulsar
135cc which was launched in recent past have plateaued at a level of 4K/
month.
* 3 wheelers - Sales trends are robust, especially in the export market. The
recent opening of permits for Bangalore would likely add extra 20-25K units
to the domestic volumes over the next 3 months.
* Margins - Bajaj expects commodity cost pressure to ease in 2HFY12E on
account of the recent fall in metal prices. The relatively higher fall in aluminium prices compared to steel will have a higher impact on motorcycle
margins than 3-wheelers. Due to the low supply chain inventory and swift
readjustment of component pricing, the impact of commodity costs reflect
relatively quickly on margins.
Export promotion scheme (DEPB) slated to be discontinued from October 2011 - Bajaj intends to take a price increase of around 5% to mitigate
the effect on profitability. The effective impact is around 8% of export revenues (30% of total revenues) leading to c12% fall in EBITDA. Our current
estimates factor the discontinuation but not the price hike.
Forthcoming launches- Two key launches are slated in the medium term:
Boxer 150cc (2QFY12) and a new Pulsar (likely in 4QFY12). The boxer is
targeted at the rural market and aims to provide a more powerful alternative
motorcycle than the segment leader which is the 100cc Splendour from
Hero Motorcorp. The new Pulsar will be a significant model refresh with
new engine and new styling. Bajaj also intends to launch a new motorcycle
from the KTM portfolio in CY12.
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