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India Equity Research Reports, IPO and Stock News
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D E P B g o e s o u t o n e x p e c t e d l i n e s …
The uncertainty surrounding Bajaj Auto (BAL) in terms of potential impact
due to the withdrawal of the DEPB regime has been cleared. As per our
earlier assumptions, from H2FY12 onwards the effective export incentive
rates would be ~5.5%. This would be ~3.5% lower than the earlier
regime of ~9% for motorcycles. In our auto OEM coverage universe, BAL
has significant exposure (~one third of revenues) to the fast growing (up
~34% YTD) export markets.
ƒ The new framework…
In the new framework, duty rates have been effectively capped at 5.5%
for motorcycles sold in any form (CKD/SKD/CBU*). The Cenvat facility
remains available in the new regime but incentive rates would remain
constant against the earlier regime where rates were propped up ~1%.
ƒ Could price hike dent export volumes?
The BAL management has given a clear indication towards price hikes in
export markets to the tune of ~3-4% to mitigate the impact of the DEPB
regime. Though we see a favourable currency movement in INR
providing some relief, on a stable basis price hikes in exports markets
could temper the furious growth (~34% YTD) witnessed till now.
ƒ Potential financial impact…
In line with our earlier estimates, EBITDA margins would be expected to
come off ~70-80 bps from the 20% range with the assumption of major
cost pass through via price hikes. However, in case that assumption
proves otherwise, further 50-80 bps declines could come through.
V a l u a t i o n
Domestic volumes have been slow. However, with the new Pulsar and
Boxer series, we expect H2FY12E to be better. At the CMP of | 1,550, the
stock is trading at 13.3x FY13E EPS of | 116.8. We have raised our target
P/E multiple to 14.0x to arrive at | 1,636 per share. We are changing our
rating on the stock from BUY to HOLD.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
D E P B g o e s o u t o n e x p e c t e d l i n e s …
The uncertainty surrounding Bajaj Auto (BAL) in terms of potential impact
due to the withdrawal of the DEPB regime has been cleared. As per our
earlier assumptions, from H2FY12 onwards the effective export incentive
rates would be ~5.5%. This would be ~3.5% lower than the earlier
regime of ~9% for motorcycles. In our auto OEM coverage universe, BAL
has significant exposure (~one third of revenues) to the fast growing (up
~34% YTD) export markets.
ƒ The new framework…
In the new framework, duty rates have been effectively capped at 5.5%
for motorcycles sold in any form (CKD/SKD/CBU*). The Cenvat facility
remains available in the new regime but incentive rates would remain
constant against the earlier regime where rates were propped up ~1%.
ƒ Could price hike dent export volumes?
The BAL management has given a clear indication towards price hikes in
export markets to the tune of ~3-4% to mitigate the impact of the DEPB
regime. Though we see a favourable currency movement in INR
providing some relief, on a stable basis price hikes in exports markets
could temper the furious growth (~34% YTD) witnessed till now.
ƒ Potential financial impact…
In line with our earlier estimates, EBITDA margins would be expected to
come off ~70-80 bps from the 20% range with the assumption of major
cost pass through via price hikes. However, in case that assumption
proves otherwise, further 50-80 bps declines could come through.
V a l u a t i o n
Domestic volumes have been slow. However, with the new Pulsar and
Boxer series, we expect H2FY12E to be better. At the CMP of | 1,550, the
stock is trading at 13.3x FY13E EPS of | 116.8. We have raised our target
P/E multiple to 14.0x to arrive at | 1,636 per share. We are changing our
rating on the stock from BUY to HOLD.
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