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New launches and weak INR to
aid growth
Action: Upgrade to Buy, and TP revised to INR1,809
BJAUT stock has corrected by 14% in the last six months due to concerns
over slowing domestic volume growth and intensifying competition. We
believe the new launches due over the next 1-2 months should lead to
improvement in domestic volumes going forward. We expect 7% volume
growth in FY13F. Further, as BJAUT derives 35% of its revenues from
exports, the weaker INR (down 20% y-y) bodes well for the company. If
the INR remains around current levels or weakens further, this will give the
company strategic advantage, especially over Chinese competitors, in our
view. At 11.6x FY14F EPS, valuations are compelling and provide a good
entry point, in our view. Upgrade to BUY.
Catalysts:
Success of new launches: BJAUT is likely to launch the all-new Pulsar
and Discover in 1QFY13. We have not built in any volume upside from
the new Discover and RE-60 four-wheeler platform. Success of these
launches may lead to upsides to our estimates.
Benefits from a weaker INR: We are building in average export
realization at INR 50 for FY13F and INR51 for FY14F. If the INR
remains around current levels or weakens further, there could be upside
to our estimates.
Competitors have introduced price increases over the last 1-2 months; if
BJAUT does the same, there could be upside risks to our estimates.
Valuation: DCF-based TP of INR1,809, implying 21% potential upside
We value BJAUT based on DCF at INR1,809. The implied target multiple
at 14x FY14F EPS (INR131.1) is lower than the average multiple of 15x.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
New launches and weak INR to
aid growth
Action: Upgrade to Buy, and TP revised to INR1,809
BJAUT stock has corrected by 14% in the last six months due to concerns
over slowing domestic volume growth and intensifying competition. We
believe the new launches due over the next 1-2 months should lead to
improvement in domestic volumes going forward. We expect 7% volume
growth in FY13F. Further, as BJAUT derives 35% of its revenues from
exports, the weaker INR (down 20% y-y) bodes well for the company. If
the INR remains around current levels or weakens further, this will give the
company strategic advantage, especially over Chinese competitors, in our
view. At 11.6x FY14F EPS, valuations are compelling and provide a good
entry point, in our view. Upgrade to BUY.
Catalysts:
Success of new launches: BJAUT is likely to launch the all-new Pulsar
and Discover in 1QFY13. We have not built in any volume upside from
the new Discover and RE-60 four-wheeler platform. Success of these
launches may lead to upsides to our estimates.
Benefits from a weaker INR: We are building in average export
realization at INR 50 for FY13F and INR51 for FY14F. If the INR
remains around current levels or weakens further, there could be upside
to our estimates.
Competitors have introduced price increases over the last 1-2 months; if
BJAUT does the same, there could be upside risks to our estimates.
Valuation: DCF-based TP of INR1,809, implying 21% potential upside
We value BJAUT based on DCF at INR1,809. The implied target multiple
at 14x FY14F EPS (INR131.1) is lower than the average multiple of 15x.
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