Visit http://indiaer.blogspot.com/ for complete details Bajaj Auto: Q2FY11 Update: Strong momentum continues!
Strong momentum continues!
Strong volume growth coupled with improved
realizations helped Bajaj Auto (BAL) increase its EBITDA
margins by 70bps on a QoQ basis at 20.7%. Further, to
mitigate input cost pressures, BAL increased the price of
its offerings by 1.5-2% across models effective
October4, 2010. We continue to remain positive on the
stock and expect revenue and earnings growth to
register 2 yr CAGR of 26% and 27% over FY10-FY12E.
Strong revenue growth: For 2QFY11, BAL registered a
revenue growth of 50% YoY at Rs43.4bn led by 46%
growth in volumes and 2.7% in realization. On a
sequential basis, revenues grew 12% driven by 8%
growth in volumes and 4% in realizations.
….drives strong operating performance: Driven by
improved realizations and strong volume growth, BAL
registered a sequential improvement of 70bps in
EBITDA margins to 20.7%.
…..resulting in strong earnings growth: Strong
revenue growth coupled with margin expansion helped
BAL register Adjusted PAT of Rs6.8bn (up 16% on QoQ
basis)
Valuation and Recommendations: At the CMP of Rs1,
515, BAL is currently trading at 18.1x core EPS of Rs76.1
for FY11E and 14.9x core EPS of Rs 88.3 for FY12E. We
continue to like the stock and maintain BUY rating with
a target price of Rs.1,740 (based on 16.1x Sept FY12E
core EPS + Cash/ investments of Rs232 per share).
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