Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Bajaj Auto
Q 2FY12: Good qtr, strong margin outlook
Event: Q2FY12 Sales and EBITDA margin ahead of estimates
Net sales increased by 10%qoq to Rs 50.5bn (+21%YoY) vs UBS-e of Rs 49.2bn,
helped by 3%qoq growth in ASP (due to price increases taken in export markets
and increase in proportion of 3Ws in domestic market). EBITDA margin at 21%
increased 110bps qoq as raw material and staff cost declined as %age of sales.
PAT was up 6%YoY to Rs 7.3b lower than UBS-e of Rs 7.6bn mainly due to
notional forex loss of Rs.954m (reversible going fwd.).
Impact: Margins to increase in 2H, Raise EPS by 10%/9% for FY12/13
We expect margins to remain strong in H2FY12 due to 1. Price increases taken by
the co. from Oct 1 in both export and domestic markets. Mgmt. has passed the net
negative impact of DEPB phase out as a 3.5% increase in export prices. 2) Also,
the duty drawback rate at 5.5% has been ahead of our expectation of 3%. 3) Sharp
INR depreciation to help improve export margins. We therefore raise FY12/13
EBITDA margin from 18.6%/17.4% to 20.2%/19.5%. We however reduce our
YoY volume growth for FY13 to 10% from 15% following price increases.
Action: Maintain Neutral, increase PT to Rs.1,800
We increase PT to Rs1,800 (from Rs1,700) following our earnings upgrade,
however maintain our Neutral rating given limited upside from current levels. Q2
conf. call at 2:00 PM IST on 24th Oct; dial in: (+91 22) 6629 0307 / 3065 0107.
Valuation: @14.3x FY13E PE, Raise PT to Rs 1,800 (from Rs 1,700)
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers with UBS’s VCAM tool with a WACC of 11.5%.
Raise PT on improved margin outlook
We increase our 12-mth PT to Rs1,800 (from Rs1,700) as following our
discussion with the mgmt. we expect margins to be better than our previous
expectations in H2 and for FY13 driven by:
1. Price increase implemented on 1st Oct. (3.5% in export market and Rs.500 on
Pulsar and Discover models in the domestic market). Mgmt. has passed the net
negative impact of DEPB phase out as a 3.5% increase in export prices.
2. Duty drawback rate announced by the govt. is offering 5.5% incentive vs our
previous estimate of 3%.
3. Focus market export incentives increased from 3% to 4% retrospectively from
1st Apr’11.
4. Additional 1% of export incentive until 31st Mar.’12 for export of motorcycles.
5. INR has depreciated by 8% vs USD (as of Oct 20th) compared to Q2FY12 avg.
of 45.8. Bajaj exports are completely dollar denominated.
Reducing volume forecast for FY13
We therefore raise FY12/13 EBITDA margin from 18.6%/17.4% to
20.2%/19.5%. We however reduce our YoY volume growth for FY13 to 10%
from 15% following price increases in the export market. We also marginally
reduce our domestic vol. growth for FY12 given weaker performance ytd in the
domestic market. However, for FY12 weaker domestic growth has been offset
by stronger growth in exports.
Bajaj Auto
Bajaj Auto was India's largest two-wheeler manufacturer until 2000. It is present
in all product segments, including three-wheelers. Bajaj has a technical tie-up
with Kawasaki in the motorcycle segment. Bajaj was strongest in scooters,
although its position has declined sharply in recent years. Bajaj is now
attempting to gain market share through the launch of new motorcycle models.
The company is also trying to gain a foothold in the two-wheeler markets in
Southeast Asia and Latin America via CKD assembly facilities set up by its
distributors.
Statement of Risk
We think key risks for Bajaj remain rising commodity prices, a potential price
war with Hero Honda in the domestic market, a sharp decline in 3W volumes,
and a drop in export sales.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Bajaj Auto
Q 2FY12: Good qtr, strong margin outlook
Event: Q2FY12 Sales and EBITDA margin ahead of estimates
Net sales increased by 10%qoq to Rs 50.5bn (+21%YoY) vs UBS-e of Rs 49.2bn,
helped by 3%qoq growth in ASP (due to price increases taken in export markets
and increase in proportion of 3Ws in domestic market). EBITDA margin at 21%
increased 110bps qoq as raw material and staff cost declined as %age of sales.
PAT was up 6%YoY to Rs 7.3b lower than UBS-e of Rs 7.6bn mainly due to
notional forex loss of Rs.954m (reversible going fwd.).
Impact: Margins to increase in 2H, Raise EPS by 10%/9% for FY12/13
We expect margins to remain strong in H2FY12 due to 1. Price increases taken by
the co. from Oct 1 in both export and domestic markets. Mgmt. has passed the net
negative impact of DEPB phase out as a 3.5% increase in export prices. 2) Also,
the duty drawback rate at 5.5% has been ahead of our expectation of 3%. 3) Sharp
INR depreciation to help improve export margins. We therefore raise FY12/13
EBITDA margin from 18.6%/17.4% to 20.2%/19.5%. We however reduce our
YoY volume growth for FY13 to 10% from 15% following price increases.
Action: Maintain Neutral, increase PT to Rs.1,800
We increase PT to Rs1,800 (from Rs1,700) following our earnings upgrade,
however maintain our Neutral rating given limited upside from current levels. Q2
conf. call at 2:00 PM IST on 24th Oct; dial in: (+91 22) 6629 0307 / 3065 0107.
Valuation: @14.3x FY13E PE, Raise PT to Rs 1,800 (from Rs 1,700)
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers with UBS’s VCAM tool with a WACC of 11.5%.
Raise PT on improved margin outlook
We increase our 12-mth PT to Rs1,800 (from Rs1,700) as following our
discussion with the mgmt. we expect margins to be better than our previous
expectations in H2 and for FY13 driven by:
1. Price increase implemented on 1st Oct. (3.5% in export market and Rs.500 on
Pulsar and Discover models in the domestic market). Mgmt. has passed the net
negative impact of DEPB phase out as a 3.5% increase in export prices.
2. Duty drawback rate announced by the govt. is offering 5.5% incentive vs our
previous estimate of 3%.
3. Focus market export incentives increased from 3% to 4% retrospectively from
1st Apr’11.
4. Additional 1% of export incentive until 31st Mar.’12 for export of motorcycles.
5. INR has depreciated by 8% vs USD (as of Oct 20th) compared to Q2FY12 avg.
of 45.8. Bajaj exports are completely dollar denominated.
Reducing volume forecast for FY13
We therefore raise FY12/13 EBITDA margin from 18.6%/17.4% to
20.2%/19.5%. We however reduce our YoY volume growth for FY13 to 10%
from 15% following price increases in the export market. We also marginally
reduce our domestic vol. growth for FY12 given weaker performance ytd in the
domestic market. However, for FY12 weaker domestic growth has been offset
by stronger growth in exports.
Bajaj Auto
Bajaj Auto was India's largest two-wheeler manufacturer until 2000. It is present
in all product segments, including three-wheelers. Bajaj has a technical tie-up
with Kawasaki in the motorcycle segment. Bajaj was strongest in scooters,
although its position has declined sharply in recent years. Bajaj is now
attempting to gain market share through the launch of new motorcycle models.
The company is also trying to gain a foothold in the two-wheeler markets in
Southeast Asia and Latin America via CKD assembly facilities set up by its
distributors.
Statement of Risk
We think key risks for Bajaj remain rising commodity prices, a potential price
war with Hero Honda in the domestic market, a sharp decline in 3W volumes,
and a drop in export sales.
No comments:
Post a Comment