Bajaj Auto
Q1 margin beat, but clouded
demand outlook
„Raise forecasts & PO, Maintain Undperform
Q1 profit, at Rs 7.4bn, was slightly ahead of expectations, despite lower financial
income. This was led by a 2% beat in realizations, reflected in a ~6% surprise in
EBITDA, at Rs 9.07bn (up 4% yoy). We raise our profit forecasts by 3%-4% over
FY14-15E to factor in USD/INR at Rs 58 (vs. Rs 55 earlier). Our PO is similarly
raised to 1,915. However, we retain our Underperform rating and prefer Hero
(HRHDF, Rs1772.9, C-1-7) in this space. Hero trades at a 19% P/E discount on
our FY15E estimates and a 9% P/E discount on consensus expectations, with
similar growth trajectories.
Margins surprise, could sustain
Q1 EBITDA margins increased 55bps yoy, at 18.5%, higher than our estimate of
17.6%, solely due to better mix (three wheeler exports up 44%) and higher
realizations. Although USD:INR continues to be favourable, we raise margins by
just 20-30bps/year, as (1) our current volume forecasts already assume a shift in
mix to pricier segments, i.e., bikes, three wheelers, and (2) export of three
wheelers should normalize (up 44% in Q1), thereby restricting ASP increases.
Demand outlook muted
Aggregate Q1 volumes declined 9% yoy, both domestic and export. We expect
the economic and competitive environment to remain challenging. Our volume
forecast is tweaked to 4.4mn in FY14E (+4% yoy) and 4.9mn in FY15E (+10%),
which imputes recovery across segments. This is driven by (1) bike launches,
mostly in the commuter segment, (2) three wheeler permits in Hyderabad and
Maharashtra, (3) new export destinations, leveraging on Kawasaki’s distribution
network, and (4) back-ended economic recovery. Although our forecasts seem
conservative, we note the company fell well short of indicative guidance last year
��
Q1 margin beat, but clouded
demand outlook
„Raise forecasts & PO, Maintain Undperform
Q1 profit, at Rs 7.4bn, was slightly ahead of expectations, despite lower financial
income. This was led by a 2% beat in realizations, reflected in a ~6% surprise in
EBITDA, at Rs 9.07bn (up 4% yoy). We raise our profit forecasts by 3%-4% over
FY14-15E to factor in USD/INR at Rs 58 (vs. Rs 55 earlier). Our PO is similarly
raised to 1,915. However, we retain our Underperform rating and prefer Hero
(HRHDF, Rs1772.9, C-1-7) in this space. Hero trades at a 19% P/E discount on
our FY15E estimates and a 9% P/E discount on consensus expectations, with
similar growth trajectories.
Margins surprise, could sustain
Q1 EBITDA margins increased 55bps yoy, at 18.5%, higher than our estimate of
17.6%, solely due to better mix (three wheeler exports up 44%) and higher
realizations. Although USD:INR continues to be favourable, we raise margins by
just 20-30bps/year, as (1) our current volume forecasts already assume a shift in
mix to pricier segments, i.e., bikes, three wheelers, and (2) export of three
wheelers should normalize (up 44% in Q1), thereby restricting ASP increases.
Demand outlook muted
Aggregate Q1 volumes declined 9% yoy, both domestic and export. We expect
the economic and competitive environment to remain challenging. Our volume
forecast is tweaked to 4.4mn in FY14E (+4% yoy) and 4.9mn in FY15E (+10%),
which imputes recovery across segments. This is driven by (1) bike launches,
mostly in the commuter segment, (2) three wheeler permits in Hyderabad and
Maharashtra, (3) new export destinations, leveraging on Kawasaki’s distribution
network, and (4) back-ended economic recovery. Although our forecasts seem
conservative, we note the company fell well short of indicative guidance last year
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