Bajaj Auto (BAJA.BO)
Alert: Riding on the Rupee
1QFY14 Con Call Takeaways: Outlook is fairly positive for FY14 — given a) the
current weakness in the INR, and b) a pick-up in domestic 3W volumes. Mgmt
noted that export hedges are in place for the remaining 3Qs of FY14 for ~740mn
USD of exports. 2Q hedges should yield a realization of ~Rs58.5/US$, vs Rs55.56
in 1Q. Our FY14/15 estimates remain unchanged, given that currency will buoy
margins and offset weak volumes.
Domestic 3W outlook is also healthy — as fresh permits are opening up -
~20,000 in Hyderabad, another 30k-35k in Maharashtra. Overall, the 3W run-rate
from Aug should stabilize at ~45k units / month – implying around ~520k units for
FY14.
Export volume weakness continues — For FY14, mgmt reckons that overall 2W
export volume growth will be ~5% (10-12% earlier). Key end markets like Nigeria
remain weak (volumes down ~12% YoY for Bajaj, -22% for industry). Mgmt is
seeding new markets like Kenya, Ivory Coast and Uganda. In the long term, the
association with Kawasaki in Indonesia and possibly markets in Lat Am should yield
benefits too (citing Philippines as precedence, wherein market share for the
Kawasaki/Bajaj combine rose to 45% from 10% when Kawasaki was on its own).
Mgmt might contemplate taking actions to grow export markets, but doesn’t see the
need to cut prices as of now, to stimulate market growth.
Domestic 2W outlook remains challenged, at least for 1H — Mgmt noted
industry retail volumes declined ~11% in June and expects volumes to decline 5%
in July. A recovery, if any, will be in 2H post monsoons. Bajaj will launch around six
variants under the Discover brand, with some of the focus being on the Economy
100cc space, given the down-trading that’s occurring due to fuel costs. Inventory
remains at around 5 weeks for the Discover; the Pulsar is lower at around 3 weeks.
Maintain Neutral. For detailed analysis of 1QFY14 results, see our note dated 19
July 2013 Bajaj Auto (BAJA.BO) - 1QFY14: Exports Offset Domestic Weakness
��
Alert: Riding on the Rupee
1QFY14 Con Call Takeaways: Outlook is fairly positive for FY14 — given a) the
current weakness in the INR, and b) a pick-up in domestic 3W volumes. Mgmt
noted that export hedges are in place for the remaining 3Qs of FY14 for ~740mn
USD of exports. 2Q hedges should yield a realization of ~Rs58.5/US$, vs Rs55.56
in 1Q. Our FY14/15 estimates remain unchanged, given that currency will buoy
margins and offset weak volumes.
Domestic 3W outlook is also healthy — as fresh permits are opening up -
~20,000 in Hyderabad, another 30k-35k in Maharashtra. Overall, the 3W run-rate
from Aug should stabilize at ~45k units / month – implying around ~520k units for
FY14.
Export volume weakness continues — For FY14, mgmt reckons that overall 2W
export volume growth will be ~5% (10-12% earlier). Key end markets like Nigeria
remain weak (volumes down ~12% YoY for Bajaj, -22% for industry). Mgmt is
seeding new markets like Kenya, Ivory Coast and Uganda. In the long term, the
association with Kawasaki in Indonesia and possibly markets in Lat Am should yield
benefits too (citing Philippines as precedence, wherein market share for the
Kawasaki/Bajaj combine rose to 45% from 10% when Kawasaki was on its own).
Mgmt might contemplate taking actions to grow export markets, but doesn’t see the
need to cut prices as of now, to stimulate market growth.
Domestic 2W outlook remains challenged, at least for 1H — Mgmt noted
industry retail volumes declined ~11% in June and expects volumes to decline 5%
in July. A recovery, if any, will be in 2H post monsoons. Bajaj will launch around six
variants under the Discover brand, with some of the focus being on the Economy
100cc space, given the down-trading that’s occurring due to fuel costs. Inventory
remains at around 5 weeks for the Discover; the Pulsar is lower at around 3 weeks.
Maintain Neutral. For detailed analysis of 1QFY14 results, see our note dated 19
July 2013 Bajaj Auto (BAJA.BO) - 1QFY14: Exports Offset Domestic Weakness
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