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Bajaj Auto (BJAUT)
Automobiles
3QFY12 beats estimates on better realizations. Bajaj Auto’s 3QFY12 profit of
Rs7,952 mn (+19% yoy, 10% qoq) was 2% higher than our estimates. The main
variance with our estimates was 2% higher than forecasted realizations due to higher
share of premium bikes in the product mix and sharp depreciation of Rupee versus
Dollar. We maintain ADD rating on the stock and prefer it over Hero Motocorp in the
two-wheeler space, as strong growth in exports will offset the slowdown in domestic
volumes for Bajaj Auto.
Richer product mix and Rupee depreciation aided operating margins
Higher share of premium motorcycles in the product mix (17.6% in 3QFY12 versus 16.5% in
2QFY12) and 10% qoq increase in export realizations (3.5% due to price increase and 6.5% due
to appreciation of Rupee versus Dollar) aided EBITDA margins. EBITDA margins increased by 90
bps qoq, 30 bps above our estimates. Raw material, staff and other expenses were stable in the
quarter.
We expect advertising expenses to start rising from 4QFY12E as Bajaj Auto launches its new Pulsar
and Duke models. However, we expect raw material expenses to decline in 4QFY12E due to lower
rubber prices, which should help the company maintain EBITDA margins in 4QFY12E.
The company reported a loss of Rs589 mn on forward hedges taken for exports. The company has
also received a notice from the Excise department for Rs779.3 mn for payment to the National
Calamity Fund on sale of vehicles at the Pantnagar plant. Out of Rs779 mn, Rs676.2 mn pertains
to FY2011 and the balance Rs103.1 mn pertains to the April-June 2011 period. The company has
filed a writ petition disputing the applicability of the calamity fund.
The Nigerian Government has also rolled back price increase on petrol to $2.27/gallon from
$3.5/gallon earlier, which has reduced the threat to Bajaj Auto’s export volumes in Nigeria, in our
view.
We maintain our ADD rating on the stock but cut our domestic volume estimates
We have revised our earnings downwards by 6-8% over FY2012-13E driven by (1) 2-4% cut in our
domestic motorcycle volume forecasts, (2) 80 bps reduction in EBITDA margins in FY2013E due to
increase in advertising expense as we expect competitive intensity to increase and premium
motorcycle share in the mix to decline from current levels, (3) we have also lowered our other
income estimates due to lower-than-estimated yield on investment. We have revised our target
price downwards to Rs1,715 (versus Rs1,865 earlier) based on 14X multiple on our FY2013E
earnings estimates.
3QFY12 performance was slightly better than our estimates
Bajaj Auto’s 3QFY12 profit of Rs7,952 mn (+19% yoy, +10% qoq) was 2% better than our
estimates. The main variance was due to a 2% beat on net average realizations. Realizations
were better than our estimates aided by higher share of premium bikes in the product mix
and benefit of depreciation of Rupee in export realizations. Export ASPs were up 18% yoy
and 10% qoq aided by depreciation of Rupee versus Dollar. EBITDA margins came in at
21% (+90 bps qoq), which was 30 bps ahead of our estimates. Tax rate came in at 23.7%
versus our estimate of 27%.
The company also reported a loss of Rs589 mn on forward hedges taken for exports. The
company has also received a notice from the Excise department for Rs779.3 mn for payment
to the National Calamity Fund on sale of vehicles at the Pantnagar plant. Out of Rs779 mn,
Rs 676.2 mn pertains to FY2011 and the balance Rs103.1 mn pertains to the April-June
2011 period. The company has filed a writ petition disputing the applicability of the calamity
fund.
Raw material to net sales declined by 100 bps qoq driven by increase in export EBITDA
margins and higher share of premium motorcycles in the mix. We except premium
motorcycle share to come down in 4QFY12E, as we expect higher demand of executive and
economy segment bikes due to a slowdown in the economy. However, we expect export
margins to remain stable in 4QFY12E driven by a stable currency.
Staff costs and other expenses were in line with our estimates. We expect advertising
expenses to start rising from 4QFY12E as Bajaj Auto launches its new Pulsar and Duke
models. However, we expect raw material expenses to decline in 4QFY12E due to lower
rubber prices, which should help the company maintain EBITDA margins in 4QFY12E.
Tax rate declined to 23.7% versus our estimate of 27%.
We have revised our earnings downwards by 6-8% over FY2012-13E driven by (1) 2-4% cut
in our volume forecasts, (2) 80 bps reduction in EBITDA margins in FY2013E due to increase
in advertising expenses, as we expect competitive intensity to increase and premium
motorcycle share in the mix to decline from current levels, and (3) we have also lowered our
other income estimates due to lower-than-estimated yield on investment.
We have revised our target price downwards to Rs1,715 (versus Rs1,865 earlier) based on
14X multiple on our FY2013E earnings estimates.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bajaj Auto (BJAUT)
Automobiles
3QFY12 beats estimates on better realizations. Bajaj Auto’s 3QFY12 profit of
Rs7,952 mn (+19% yoy, 10% qoq) was 2% higher than our estimates. The main
variance with our estimates was 2% higher than forecasted realizations due to higher
share of premium bikes in the product mix and sharp depreciation of Rupee versus
Dollar. We maintain ADD rating on the stock and prefer it over Hero Motocorp in the
two-wheeler space, as strong growth in exports will offset the slowdown in domestic
volumes for Bajaj Auto.
Richer product mix and Rupee depreciation aided operating margins
Higher share of premium motorcycles in the product mix (17.6% in 3QFY12 versus 16.5% in
2QFY12) and 10% qoq increase in export realizations (3.5% due to price increase and 6.5% due
to appreciation of Rupee versus Dollar) aided EBITDA margins. EBITDA margins increased by 90
bps qoq, 30 bps above our estimates. Raw material, staff and other expenses were stable in the
quarter.
We expect advertising expenses to start rising from 4QFY12E as Bajaj Auto launches its new Pulsar
and Duke models. However, we expect raw material expenses to decline in 4QFY12E due to lower
rubber prices, which should help the company maintain EBITDA margins in 4QFY12E.
The company reported a loss of Rs589 mn on forward hedges taken for exports. The company has
also received a notice from the Excise department for Rs779.3 mn for payment to the National
Calamity Fund on sale of vehicles at the Pantnagar plant. Out of Rs779 mn, Rs676.2 mn pertains
to FY2011 and the balance Rs103.1 mn pertains to the April-June 2011 period. The company has
filed a writ petition disputing the applicability of the calamity fund.
The Nigerian Government has also rolled back price increase on petrol to $2.27/gallon from
$3.5/gallon earlier, which has reduced the threat to Bajaj Auto’s export volumes in Nigeria, in our
view.
We maintain our ADD rating on the stock but cut our domestic volume estimates
We have revised our earnings downwards by 6-8% over FY2012-13E driven by (1) 2-4% cut in our
domestic motorcycle volume forecasts, (2) 80 bps reduction in EBITDA margins in FY2013E due to
increase in advertising expense as we expect competitive intensity to increase and premium
motorcycle share in the mix to decline from current levels, (3) we have also lowered our other
income estimates due to lower-than-estimated yield on investment. We have revised our target
price downwards to Rs1,715 (versus Rs1,865 earlier) based on 14X multiple on our FY2013E
earnings estimates.
3QFY12 performance was slightly better than our estimates
Bajaj Auto’s 3QFY12 profit of Rs7,952 mn (+19% yoy, +10% qoq) was 2% better than our
estimates. The main variance was due to a 2% beat on net average realizations. Realizations
were better than our estimates aided by higher share of premium bikes in the product mix
and benefit of depreciation of Rupee in export realizations. Export ASPs were up 18% yoy
and 10% qoq aided by depreciation of Rupee versus Dollar. EBITDA margins came in at
21% (+90 bps qoq), which was 30 bps ahead of our estimates. Tax rate came in at 23.7%
versus our estimate of 27%.
The company also reported a loss of Rs589 mn on forward hedges taken for exports. The
company has also received a notice from the Excise department for Rs779.3 mn for payment
to the National Calamity Fund on sale of vehicles at the Pantnagar plant. Out of Rs779 mn,
Rs 676.2 mn pertains to FY2011 and the balance Rs103.1 mn pertains to the April-June
2011 period. The company has filed a writ petition disputing the applicability of the calamity
fund.
Raw material to net sales declined by 100 bps qoq driven by increase in export EBITDA
margins and higher share of premium motorcycles in the mix. We except premium
motorcycle share to come down in 4QFY12E, as we expect higher demand of executive and
economy segment bikes due to a slowdown in the economy. However, we expect export
margins to remain stable in 4QFY12E driven by a stable currency.
Staff costs and other expenses were in line with our estimates. We expect advertising
expenses to start rising from 4QFY12E as Bajaj Auto launches its new Pulsar and Duke
models. However, we expect raw material expenses to decline in 4QFY12E due to lower
rubber prices, which should help the company maintain EBITDA margins in 4QFY12E.
Tax rate declined to 23.7% versus our estimate of 27%.
We have revised our earnings downwards by 6-8% over FY2012-13E driven by (1) 2-4% cut
in our volume forecasts, (2) 80 bps reduction in EBITDA margins in FY2013E due to increase
in advertising expenses, as we expect competitive intensity to increase and premium
motorcycle share in the mix to decline from current levels, and (3) we have also lowered our
other income estimates due to lower-than-estimated yield on investment.
We have revised our target price downwards to Rs1,715 (versus Rs1,865 earlier) based on
14X multiple on our FY2013E earnings estimates.
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