Bajaj Auto - Export Headwinds; Result Update Q3FY15 :: Edelweiss, report

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Bajaj Auto (BJAUT) delivered good set of numbers for Q3FY15 with revenue/adjusted EBITDA ~2%/5% ahead of estimates. Adjusted PAT at INR8bn was hit by lower other income. Management highlighted launch of Platina (electric start; addressing 60% of segment demand) and 2 new Pulsars in domestic market to drive growth. We also understand that a new brand under the 100cc category is expected to be launched in FY16. Export demand outlook remains subdued due to sharp price hikes in some markets. Currency volatility raises demand/margin risks in export markets. Success of new launches and market share gains in domestic market remains critical for stock performance. We lower our EPS by 11%/16% in FY15E/16E to reflect weak demand and lower other income (delayed maturity of fixed maturity plans in FY18).

Good operating performance

BJAUT’s Q3FY15 performance was ahead of estimates. Revenue at INR56.5bn was 2% ahead of estimates led by favourable average realisations. Adjusted EBITDA at INR11.5bn surpassed estimates by 5%. Adjusted EBITDA margin at 20.3% (up 30bps QoQ) benefitted from lower RM costs (RM to sales fell by ~60bps QoQ). APAT at INR8bn was ~4% below estimates due to lower other income (seasonality of maturity of FMPs). Tax rate at 31% also stood higher than our estimate.

Demand outlook subdued: Market share gain key

While rising share of premium motorcycles, launch of Platina (electric start) and strong domestic 3-wheeler demand are positives, lacklustre Discover performance and weak exports demand remain concerns. Success of new launches remains key monitorable.

LINK
https://www.edelweiss.in/research/Bajaj-Auto--Export-Headwinds;-Result-Update-Q3FY15/28051.html