Operating results in-line; maintain Neutral Bajaj Auto:: Centrum

Operating results in-line; maintain Neutral
Bajaj Auto’s (BAL) 3QFY13 operating performance was largely in line
with our expectations with EBITDA margins at 20.1% compared to our
estimate of 19.9% and adjusted PAT at Rs8.19bn compared to our est.
of Rs8.18bn. The recent success of Discover ST and Pulsar NS200
reflects improved market share in both segments. Overall market
share of BAL in the domestic motorcycle segment stood at 25.9% vs.
25.7% in 2QFY13. The new Discover 100cc is likely to be launched pan
India by the end of Feb’12. While, we continue to prefer BAL in the
two-wheeler space and understand that the company has largely
been able to maintain its market share in the domestic motorcycle
segment, we believe that at the current valuations, the stock is pricing
in most of the positives. We continue to maintain our Neutral rating
on the stock with a target price of Rs.2,213.
Operating performance in line: Net sales during the quarter stood at
Rs.55.1bn (a growth of 9% both on YoY and QoQ basis). Net realization
stood at Rs.47,060/unit largely driven by better export realizations (up
5% YoY and 2.5% QoQ). While domestic realization stood at
Rs.47,360/unit (up 7% YoY but lower by 1% QoQ), export realization
stood at Rs.46,462/unit (up 3.5% YoY and 8.9% QoQ). EBITDA margin
was largely in line with our expectations at 20.1%. Adjusted PAT for
the quarter stood at Rs8.19bn compared to our estimate of Rs8.18bn.
Conference call highlights: 1.) Re/$ realization stood at 49.9 during
3QFY13 compared to 48.8 in 2QFY13. The company expects Re/$ at
54 for FY14E. 2.) It expects stable pricing for the domestic motorcycle
industry (the likely entry of Honda in 100cc segment, could lead to
some pricing pressure in the segment) 3.) Expects a CAGR of 15-18%
in exports over the next 5 years 4.) While DEPB has been cut from
5.5% to 2% effective 10 Oct’12, the company could pass on~ 75-80%
of the impact effective from Nov’ 1, 12. 5.) It plans to launch
upgrades in the three-wheeler segment in FY14E 6.) Focus will
remain on brand specific margin 7.) To launch new Discover 100cc
Pan India by the end Feb’12 8.) Bajaj now accounts for 20-25% of
KTM’s overall export volumes; the company has seen a significant
turnaround in the financials over the last 2 quarters.

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Valuations and Recommendations: At the CMP of Rs.2077, the stock
is currently trading at 15.5x FY14 EPS of Rs.134 and 14.2x FY15E EPS of
Rs.146. We continue to maintain Neutral view on the stock with a
target price of Rs.2,213.