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2QFY12 reported PAT came in at Rs.7.3B, which included a MTM
loss of Rs.954m on outstanding forward contracts. Adjusting for the
same, the adj. PAT came in at Rs7.9Bn (+16%yoy), which was above
Street estimates. The variance was driven by an improvement in
EBITDA margin, which came in at 20.1% (+100bp qoq) — the OEM
benefited from an improved product mix (given higher exports and
increased sales of Pulsar bikes).
Takeaways from management’s conference call: Volume
guidance: Management expects volume sales to come in at 4.5m
units in FY12E (+18% yoy) driven largely by exports, which are
expected at 1.55m units (+29% yoy). The company will launch the
next-generation Pulsar in CY12E. EBITDA Margins: Management
expects margins to improve over 2H, given the benefit of the INR
depreciation, sustained growth in exports and recent price hikes taken
over 2Q. The company has taken a price hike of 3.5% in the quarter
to offset the decline in DEPB rate to 5.5% (from 9% earlier) and the
government has raised incentives in the FMS and tradeable certificate
schemes by 100bps. Tax Rates: Management expects tax rates to
increase over FY13E as the benefits from the tax-free Pantnagar plant
will moderate
Our View: We are raising our estimates by c.8% over FY12-13 to
factor in the expansion in margins driven by healthy export growth.
We are consequently valuing the stock at c.13.5x forward P/E
multiple (we believe that the stronger-than-expected growth in
exports will be supportive of margins) and set a revised Mar-12 target
price of Rs.1,700. We prefer Bajaj Auto in the two-wheeler segment.
Key Risks: On the upside: stronger-than-expected growth in the
domestic segment. On the downside: moderation in export growth;
any sharp fluctuation in the INR
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
2QFY12 reported PAT came in at Rs.7.3B, which included a MTM
loss of Rs.954m on outstanding forward contracts. Adjusting for the
same, the adj. PAT came in at Rs7.9Bn (+16%yoy), which was above
Street estimates. The variance was driven by an improvement in
EBITDA margin, which came in at 20.1% (+100bp qoq) — the OEM
benefited from an improved product mix (given higher exports and
increased sales of Pulsar bikes).
Takeaways from management’s conference call: Volume
guidance: Management expects volume sales to come in at 4.5m
units in FY12E (+18% yoy) driven largely by exports, which are
expected at 1.55m units (+29% yoy). The company will launch the
next-generation Pulsar in CY12E. EBITDA Margins: Management
expects margins to improve over 2H, given the benefit of the INR
depreciation, sustained growth in exports and recent price hikes taken
over 2Q. The company has taken a price hike of 3.5% in the quarter
to offset the decline in DEPB rate to 5.5% (from 9% earlier) and the
government has raised incentives in the FMS and tradeable certificate
schemes by 100bps. Tax Rates: Management expects tax rates to
increase over FY13E as the benefits from the tax-free Pantnagar plant
will moderate
Our View: We are raising our estimates by c.8% over FY12-13 to
factor in the expansion in margins driven by healthy export growth.
We are consequently valuing the stock at c.13.5x forward P/E
multiple (we believe that the stronger-than-expected growth in
exports will be supportive of margins) and set a revised Mar-12 target
price of Rs.1,700. We prefer Bajaj Auto in the two-wheeler segment.
Key Risks: On the upside: stronger-than-expected growth in the
domestic segment. On the downside: moderation in export growth;
any sharp fluctuation in the INR
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