Stays on course despite challenging quarter
Bajaj Auto (BAL’s) 1QFY13 operating performance was largely in line with our
expectations with EBITDA margins at 19.4% compared to our estimate of
19.1%. Despite lower revenue growth, savings in RMC cost helped the
company register better than expected performance. Pan India launch of
Pulsar NS and Discover 125 ST coupled with new motorcycles in the Executive
segment during the festive season is likely to help the company gain
incremental volumes. We continue to remain positive on the stock and
maintain Buy rating with a target price of Rs.1,778.
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Operating performance better than estimates: BAL registered 3.7%/5.3%
YoY/QoQ revenue growth in 1QFY13 to Rs49.6bn. While domestic realization
declined by 1.1% (our est. drop of 0.4%), export realization declined by 1.6%.
Despite lower revenues, the company managed to report EBITDA margin of
19.4% (Excluding operating other income of Rs.893mn being included in other
income, margins stand at 17.9%). Adjusted PAT for the quarter stood at
Rs.7.18bn compared to our estimate of Rs.7.12bn
Conference call highlights: 1) Against management commentary from Hero
MotoCorp (expecting 9-10% YoY growth for the industry in FY13E), BAL
remains conservative expecting the growth to moderate to 7-8% in the
period. 2) Capex plan for FY13E is estimated at Rs.3.5bn 3.) Export realization
for the quarter was at INR/USD 49.8 and 90-95% of the remaining exports in
FY13 are covered at 50. 4.) As indicated earlier based on dealer interaction that
BAL was likely to increase prices, the management confirmed raising prices in
the range of Rs.500-Rs.1000 effective 14 July 2012.
Valuations and Recommendations: At the CMP of Rs.1,549, the stock is
currently trading at 13.5x FY12 EPS of Rs.115 and 11.7x FY13E EPS of Rs.132.
We continue to remain positive on the stock and maintain BUY rating on the
stock with a revised target price of Rs.1,778.
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